MRM Commentary

Commentary

Monthly Investment Commentary

September 2023

      Another Weak August

              In recent years, August has had a reputation as a weak month for stocks. Since 1986, August stock market performance has ranked as the lowest of all 12 months, returning on average a negative 0.8 percent. The August 2023 weakness mirrored historical experience, so the declines seen the past month did not surprise many market analysts, especially given that the market was perhaps due for some consolidation following the strong performance through the first seven months of the year.



      MRM NET COMPOSITE PORTFOLIO RESULTS (As of 8/31/2023)
      MRM Group claims compliance with the Global Investment Performance Standards (GIPS®).
      Please contact MRM Group to obtain a Compliant Presentation and/or MRM's list of Composite descriptions.

      MRM Portfolio

      Stocks
      Global stock and bond markets declined in August as stronger-than-expected economic data stoked fears the U.S. Federal Reserve (Fed) would continue its path of interest rate hikes. Losses were broad-based with almost every sector of the S&P 500 Index, except energy, declining. Disappointing economic growth out of China compounded stock investor concerns and resulted in emerging market stocks underperforming their developed market peers.

      Bonds
      The Bloomberg U.S. Aggregate Bond Index declined as the yield on the 10-year U.S. Treasury touched its highest level since late 2007. Larger than usual issuance following the debt ceiling deal, as well as surprisingly resilient economic growth, have helped push yields higher. Despite the broad index declines for the month, U.S. corporate high yield bonds eked out modest gains.

      Macro
      The U.S. unemployment rate spiked higher from 3.5% to 3.8% due to a significant uptick in the number of people looking for work. The Conference Board Leading Economic Index posted its sixteenth consecutive monthly decline and is currently signaling that a recession may be on the horizon. Meanwhile the Fed’s Coincident Economic Index is showing improvements, indicating current strength in the economy. Consumers continue to exhibit resiliency, with personal spending rising 0.8% in July.

      Earnings
      According to FactSet, corporate earnings per share (EPS) declined by 4.1% for the second quarter of 2023 with just 79% of companies in the S&P 500 Index reporting a positive earnings surprise. EPS growth is expected to rise in the third quarter of 2023 by 0.5%. Stock valuations remain above the long-term average with analysts forecasting EPS growth for all of 2023 to be above 1%.

      MRM'S VIEW

      The U.S. economy continues to exhibit resilience as the Fed attempts to engineer a soft landing in its battle against inflation. In the face of economic strength, more economists are backing off their recession calls, despite signs from the Fed that more rate hikes may be necessary to tame inflation.

      Source: MassMutual/MVT

      MRM model holdings as of June 30, 2023

      Allocations

      IMPORTANT DISCLOSURES

      MRM Group, Inc. (“MRM”) is a state-registered investment advisor and an independent management firm that is not affiliated with any parent organization. Using quantitative selection methods, each MRM strategy searches within a well-defined universe of securities, using consistent investment criteria to identify attractive investments and create diversified portfolios. MRM seeks to provide long-term capital growth.

      Allocations

      The portfolios do NOT use inverse or leveraged ETFs. Universe vehicles may change, from time to time, when approved by the principal of MRM Asset Allocation Group at its sole discretion.

      BENCHMARK NOTES

      Effective Nov. 1, 2016 the Dynamic Overlay benchmark was changed to Morningstar’s Tactical Allocation. The benchmark was applied retroactively to the beginning of the performance period, January 1, 2008. This change had the net effect of placing the Dynamic Overlay Model Portfolio in a more favorable light than would otherwise have been the case if we used the blended benchmark described below. Although this change had a favorable impact on the comparative effect on the model’s performance but we believe the change in benchmark more appropriately aligns with our Dynamic Overlay Strategy in that it is designed a tactical allocation rather than a static blended benchmark of 75% S&P 500 Index Total Return and 25% MSCI EAFE. Morningstar’s Tactical Allocation Category averages returns for the peer group based on the return of each fund within the group, for the period shown. The S&P 500 Index with dividends is an unmanaged composite of 500 large-capitalization companies whose data is obtained from the Standard & Poor’s website. S&P 500 is a registered trademark of McGraw-Hill, Inc. The MSCI EAFE Gross Index is a free float–adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada, with data from the MSCI website using price with reinvestment of dividends. The performance of blended benchmarks is shown for comparison because MRM uses securities which track indices related to these products. The Dow Jones US Select Dividend Index comprises 100 stocks and aims to represent the U.S.’s leading stocks by dividend yield. An investment cannot be made directly into an index.

      DISCLOSURES

      MRM Group claims compliance with the Global Investment Performance Standards (GIPS®). MRM has been independently verified for the periods January 1, 2008 through June 30, 2023. The verification report is available upon request. Verification assesses whether (1) MRM has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) MRM’s policies and procedures are designed to calculate the present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.

      Valuations are computed and performance is reported in U.S. dollars. Client performance may differ based upon the structure of a particular investment program. For example, some programs are structured as wrap fee programs in which trading costs and brokerage commissions are included in one all-inclusive wrapped fee. As such, these costs may be higher than if the client were to pay trading costs and brokerage commissions separately. The standard management fee is 2.0%. Deviation from the model’s diversified structure may result in different risk, return, and diversification characteristics and would therefore not be representative of the models.

      All information contained herein is for informational purposes only. This is not a solicitation to offer investment advice in any state where it would be unlawful. There is no assurance that this platform will produce profitable returns or that any account will have results similar to those of the platform. Past performance is not a guarantee of future results. You may lose money. Factors impacting client returns include individual client risk tolerance, restrictions client may place on the account, investment objectives, choice of broker/dealer or custodians, as well as other factors. Any particular client’s account performance may vary substantially from the program results due to, among other things, commission, timing of order entry, or the manner in which the trades are executed. The investment return and principal value of an investment will fluctuate dramatically, and an investor’s equity, when liquidated, may be worth more or less than the original cost. Investors should consider the investment objective, risks, charges, and expenses carefully prior to investing.

      Investors should not rely on charts and graphs alone when making investing decisions. Investments in securities of non-US issuers involve investment risks different from those of U.S. issuers, including currency risks, political, social, and economic risks. Net-of-fees returns are presented after advisor, management, custodial and trading expenses. The net of fee returns are calculated using actual management fees. The actual fees charged vary and range from .5% to 2.2%, depending on the size of the account and the custodian.

      If you wish to modify or impose reasonable restrictions concerning the management of your account, or if your financial situation, investment objectives, or risk tolerance have changed, please contact your MRM Group investment advisor representative or contact the Manager at (314) 628-1100. We will contact you at least annually to determine if your investment goals, objectives, and risk tolerance have changed.

      All MRM platforms are suitable for long term investing. Please read the fact sheets and disclosures for each platform carefully before investing.

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