Ocean Park Capital Management

2503 Main Street

Santa Monica, CA 90405

Main: 310.392.7300

Daily Performance Line:  310.281.8577

July 2017
Market Update
(all values as of 09.30.2020)

Stock Indices:

Dow Jones 27,781
S&P 500 3,363
Nasdaq 11,167

Bond Sector Yields:

2 Yr Treasury 0.13%
10 Yr Treasury 0.69%
10 Yr Municipal 0.84%
High Yield 5.77%

YTD Market Returns:

Dow Jones -2.65%
S&P 500 4.09%
Nasdaq 24.46%
MSCI-EAFE -8.92%
MSCI-Europe -10.53%
MSCI-Pacific -6.19%
MSCI-Emg Mkt -2.93%
 
US Agg Bond 6.79%
US Corp Bond 6.64%
US Gov’t Bond 8.04%

Commodity Prices:

Gold 1,892
Silver 23.37
Oil (WTI) 39.88

Currencies:

Dollar / Euro 1.17
Dollar / Pound 1.28
Yen / Dollar 105.60
Dollar / Canadian 0.74

Fund Overview

Equities posted solid gains in July, as did the Ocean Park funds.  Standouts included our positions in consumer discretionary and service, producer durables, and technology stocks.  In particular, semiconductor manufacturers and semiconductor equipment makers rebounded strongly.  As a result, we outperformed most of the major indices for the month and continue to outperform for the year to date.

During July, we added to positions in the consumer discretionary and service sector, and reduced positions in the health care, materials and processing, producer durables, and technology sectors.  We finished the month at about 92% net long, down from about 95% at the end of June.

A schedule showing the performance of the Investors Fund is included below, along with our Asset Allocation Chart. Daily updates on our activity are available on our Results Line, at
310-281-8577, and current information is also maintained on our website at www.oceanparkcapital.com. To gain access to the site enter password opcap.



*These results are pro forma. Actual results for most investors will vary. See additional disclosures on page 4.
Past performance does not guarantee future results.

 

 

 

 
Equity Overview - July 2017

 Equity Overview

Consistent with the recent trend, growth stocks outpaced value stocks, and earnings surprises continued to drive superior stock performance.  All sectors in the S&P 500 recorded gains, except for telecom stocks.

Second quarter earnings reported in July were outstanding.  Since earnings are a prime driver of stock prices, our view is that these results explain the strong performance of equities in July. With 57% of S&P 500 companies reporting, the blended growth rate for Q1 earnings was 9.1%, well above the 6.6% rate projected at the beginning of the quarter.  In addition, 73% of companies reporting beat consensus earnings expectations, compared with the 70% one-year average.  Remarkably, 73% of companies reporting beat consensus revenue estimates, compared with the 56% one-year average.  If this number holds for the balance of the reporting season, it will be the highest percentage of revenue beats in 9 years.  As we have pointed out previously, earnings beats in recent years have often been driven by cost-cutting and automation rather than by increased sales, so the continuation of significant revenue gains in the second quarter is encouraging.

 

 

 

 

 
Macro Overview - July 2017

Macro Overview

Economic statistics reported in July were generally positive.  Manufacturing, durable goods orders, and consumer confidence were strong.  Employment growth rebounded with 222,000 new jobs versus expectations of 170,000.  The Commerce Department initial estimate of second quarter growth was 2.6%, in line with expectations and substantially better than first quarter growth of 1.2%.  However, retail sales were lower and existing home sales disappointed.  And a potentially troubling data point arose in the area of consumer credit, as the charge-off rate (the ratio of outstanding debt that U.S credit card issuers write off as a loss) increased in the second quarter to 3.29%, its highest level in four years.

The Fed kept interest rates unchanged and confirmed plans to begin downsizing its bond holdings soon.  It also noted that inflation remains shy of its 2% target (latest consumer price index was flat) but said that it expected an uptick.

The administration’s plan for the economy is in tatters, but the markets seem unconcerned.  The effort to “repeal and replace” Obamacare died in the Senate and is unlikely to be resurrected.  Headlines late in the month announced a “deal” on tax reform between Republicans in Congress and the White House, but specifics were noticeably absent—except that it definitely will not include the border adjustment tax on imports previously advocated by House Speaker Ryan.  Pronouncements that a broad tax reform bill would be passed this year were dismissed by commentators in terms ranging from optimistic to impossible.  Infrastructure investment has moved to the back burner, as the president’s recent press conference on the subject devolved into a defense of his widely decried comments on the Charlottesville violence.  And Congress will have a full plate when it returns in September, as it must pass a budget and increase the debt limit before the month-end deadline.

In international news, the recovery in Europe was highlighted in a lengthy article on Spain in the New York Times.  It pointed out that after a decade of economic catastrophe, the Spanish economy has returned to its pre-crisis size and is growing at the rate of 3% per year.

 

 
Additional Disclosures - July 2017

Additional Disclosures

Performance data for OPI reflect the reinvestment of dividends and other earnings on the fund’s assets.  Performance data for the major indices reflect only changes in the value of those indices, and would be higher if dividends were included. However, the index data do not reflect fees that would be paid to index fund managers and transaction costs that would be incurred when their component stocks are bought or sold, while OPI’s data do reflect quarterly fees and expenses incurred by the fund.  The information provided is believed to be reliable, but its accuracy or completeness is not warranted. This material is not intended as an offer or solicitation for the purchase or sale of any stock, bond, mutual fund, or any other financial instrument. The views and strategies discussed herein may not be appropriate and/or suitable for all investors. This material is meant solely for informational purposes, and is not intended to suffice as any type of accounting, legal, tax, or estate planning advice. Any and all forecasts mentioned are for illustrative purposes only and should not be interpreted as investment recommendations.