Update: May 18, 2015

| May 18, 2015

May 18, 2015

 

Portfolio Update

As we head into the summer, US equities are hitting record highs and market-moving news is slowing down.  That’s not to say we won’t see any volatility during the summer months.  However, I do expect it to be relatively quiet on the news front – at least as long as geopolitical events remain calm.

For the time being, stocks are performing well.  The S&P 500 just hit record highs and is up nearly 4% on the year.  The Russell 2000 is still 2% below record highs but is also a tad under 4% higher this year.  The widely followed but less important Dow Jones Index is also at record highs today, and is up about 3.5%.

Essentially, the markets are moving higher as concerns lessen over an impending rate hike.  Worse than expected economic news is making it very difficult to justify a rate hike by the Fed in the coming months.  What once was predicted as a June increase is now more likely to occur in September or December.  Futures markets are betting on the latter.

However, despite the recent economic ‘slowdown’, the job market still continues to improve.  As long as people are getting jobs, money will be spent over the summer.  I expect to see a rebound in consumer spending during the traditional vacation months coming up.

Finally, there has been significant action in bonds.  The 10-year Treasury yield is actually around 2.25% for only the second time this year.  It’s important to keep an eye on the bond markets as bond traders usually tend to be more forward thinking than stock traders.

Now, let’s take a look at some portfolio highlights…

 

Portfolio Highlights

Just a quick note:  We won’t update every open position every update.  I try to focus on the positions that have some significant news or price movement.

  • Starbucks (SBUX) October 52.5 Calls – We bought October calls on SBUX in order to give this trade plenty of time to play out. Yet, we’ve already been up as much as 40% in the first week of the trade!  The company continues to roll out new products and get plenty of positive press.  These calls will be in the money before we know it.

 

  • Cray (CRAY) June 30 Calls – Cray hadn’t done much for us yet, so it was nice to see the stock jump higher. The share price held at the $28 support level as expected, and jumped to almost $32 before pulling back slightly to around $30.  Since then, we’re seeing the stock trend higher above its key major moving averages.  It may not be long before CRAY is ready to make a substantial move towards 52-week highs.

 

  • Pfizer (PFE) June 35 Puts – Despite the higher overall move by large stocks, we’ve managed to do pretty well on our PFE puts. While the stock is being held up by support, it also hasn’t crossed above the key 50-day moving average.  If the market does sell off, these puts (which have been as much as 66% winners) could become huge gainers.

 

Category: AOA Updates