M1 Finance Portfolio: Dividend Aristocrats 2020 - Week 41 (July 24th, 2020 - $749.36)

Week 41 - $749.36

Rising tensions between the two economic superpowers of the People's Republic of China and the United States of America threaten to derail over twenty years of established trade agreements with stocks declining over fears of a reignited trade war.

Total Report (Since October 11th, 2019)

Positive Performing Sectors
1. Materials (+25.53%)
2. Healthcare (+19.37%)
3. Industrials (+14.50%)
4. Consumer Staples (+13.17%)
5. Financials (+8.94%)
6. Consumer Discretionary (+7.47%)

Negative Performing Sectors
7. Information Technology (-4.89%)
8. Utilities (-7.30%)
9. Communication Services (-15.07%)
10. Energy (-17.60%)
11. Real Estate (-30.53%)

Weekly Report (July 24th, 2020)

Positive Performing Sectors
1. Utilities (+1.99%)
2. Financials (+1.74%)
3. Energy (+1.58%)
4. Industrials (+1.45%)
5. Consumer Discretionary (+1.17%)
6. Consumer Staples (+0.81%)
7. Healthcare (+0.15%)
8. Materials (+0.08%)

Negative Performing Sectors
9. Information Technology (-1.49%)
10. Communication Services (-2.31%)
11. Real Estate (-4.25%)

GICS Sector Performance Ratio - Balanced: From 11:0 (100.00%) to 8:3 (72.73%)

Review

Even as the coronavirus continues to mount pressure on the beleaguered US economy to once again shut down, more crises from across the Pacific threatens to hurl its economic recovery further away as another trade war with China seems imminent. Tensions rose over accusations of Chinese agents attempting to steal research into the COVID-19 vaccine within the US, prompting retaliatory actions from both sides. For now, these actions have yet to spill over into the economy, yet investors remained skittish this week. This is compounded by record-breaking daily infections in several states that could initiate a second shutdown that could severely hinder progress to an economic recovery for this year.

Given the current situation surrounding the health and productivity of the US economy, it is likely that an economic recovery will not fully materialize until at least next year. Continued and increasing support by government bodies will be necessary to ensure a stable path for business and consumer activity to function, and further focus on preventing further infections and developing a vaccine for the virus will be crucial to the economy's future success.

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Last Week's Update (July 17th, 2020)
M1 Finance Platform Referral Link: https://m1.finance/UIl_N9XNA_CO
M1 Finance Dividend Aristocrats 2020 Pie: https://m1.finance/quB1JH2k6

M1 Finance Portfolio: Dividend Aristocrats 2020 - Week 40 (July 17th, 2020 - $721.40)

Week 40 - $721.40

Stocks rise for the third week in a row, backed by increased retail sales and industrial production as the market looks to reach back to its historical highs, even as the threat of further shutdowns looms.

Total Report (Since October 11th, 2019)

Positive Performing Sectors
1. Materials (+25.93%)
2. Healthcare (+19.53%)
3. Consumer Staples (+11.65%)
4. Industrials (+11.64%)
5. Financials (+5.47%)
6. Consumer Discretionary (+5.14%)

Negative Performing Sectors
7. Information Technology (-1.79%)
8. Communication Services (-10.82%)
9. Utilities (-11.66%)
10. Energy (-21.03%)
11. Real Estate (-23.70%)

Weekly Report (July 17th, 2020)

Positive Performing Sectors
1. Healthcare (+6.11%)
2. Materials (+5.74%)
3. Industrials (+5.67%)
4. Financials (+3.98%)
5. Consumer Discretionary (+2.81%)
6. Consumer Staples (+2.28%)
7. Energy (+2.19%)
8. Utilities (+2.10%)
9. Information Technology (+0.39%)
10. Communication Services (+0.37%)
11. Real Estate (+0.03%)

Negative Performing Sectors
None

GICS Sector Performance Ratio - Balanced: From 4:7 (36.37%) to 11:0 (100.00%)

Review

Stocks saw valuations rise across all sectors on positive news for both retail and industry, with retail sales increasing by 7.5% since June and industrial production seeing its largest increase since 1959. While any positive news is welcoming news in light of the COVID-19 recession, it is important to bear in mind that these gains in the economic sector are merely recovering to the levels before the pandemic ignited a global economic crisis. Many economic sectors are still not performing at their pre-pandemic levels, yet because stock pricing is forward-looking as opposed to backward-looking, valuations are often prone to overestimation of the severity of a given event, whether it be bolstered investor confidence or heightened fears. This forward-thinking mindset also leads the stock market to underestimate the impact any given event may have over the long-term health of the economy. The reality of the situation is never priced in until after the fact is revealed, and this often leads to notable discrepancies between what investors believe a company is worth versus the real intrinsic value of the company. Short-term evaluations rarely reflect the current value of an investment, but given a long enough time frame, the value of an investment reflects less of speculative pricing and more of the true economic value an investment provides.

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Last Week's Update (July 10th, 2020)
M1 Finance Platform Referral Link: https://m1.finance/UIl_N9XNA_CO
M1 Finance Dividend Aristocrats 2020 Pie: https://m1.finance/quB1JH2k6

M1 Finance Portfolio: Dividend Aristocrats 2020 - Week 39 (July 10th, 2020 - $674.25)

Week 39 - $674.25

The week saw yet another positive end as the stock market pushes its upward momentum with signs of increased consumer activity. Yet with new surges of COVID-19 forcing states to roll back on re-openings, the economic situation remains volatile.

Total Report (Since October 11th, 2019)

Positive Performing Sectors
1. Materials (+14.11%)
2. Consumer Staples (+6.94%)
3. Healthcare (+6.45%)
4. Industrials (+0.43%)

Negative Performing Sectors
5. Consumer Discretionary (-0.74%)
6. Financials (-2.35%)
7. Information Technology (-2.70%)
8. Communication Services (-11.87%)
9. Utilities (-16.17%)
10. Real Estate (-24.43%)
11. Energy (-25.59%)

Weekly Report (July 10th, 2020)

Positive Performing Sectors
1. Financials (+2.97%)
2. Communication Services (+1.87%)
3. Consumer Staples (+0.96%)
4. Materials (+0.96%)

Negative Performing Sectors
5. Consumer Discretionary (-0.25%)
6. Healthcare (-0.51%)
7. Industrials (-0.76%)
8. Utilities (-1.86%)
9. Information Technology (-2.20%)
10. Energy (-3.27%)
11. Real Estate (-5.93%)

GICS Sector Performance Ratio - Balanced: From 9:2 (81.82%) to 4:7 (36.37%)

Review

Much of the gains experienced for this week heavily slanted towards technology-based and long-term growth-oriented stocks, signs that a growing interest for remote business models and all-round growth is taking hold. This is opposed to the much older, time-proven and stable investments that have provided many of the staple goods and services that encompass the majority of the U.S. economy, such as the Dividend Aristocrats which saw an overall loss in their stock values. Ross Stores (ROST) became one of the first casualty of the 2020 recession, after it cut its dividend in May and was subsequently removed from the Dividend Aristocrats list after only five months since its inclusion.

Does this mean that a strong, dividend-based portfolio is no longer a valid investment strategy, as evident by the increasing stock values contrasting to that of falling values for dividend investments?

Not quite. Companies with a long history of paying increasing dividends do so because they have nearly exhausted their own investment opportunities and have reached "maturity." That is, their growth phase has slowed to the point where further investment into their business would only yield a fraction of that of their early days, and that simply returning a portion of their profits to shareholders as a result of their maximized potential would bring more value for the company than to exhaust great sums for little gain.

In this sense, dividend-focused investments are a more accurate representation of the state of the economy than growth stocks, as the growth of stock prices are driven purely by the willingness of other investors for pay for the same investment, and thereby risk speculation. Investments driven by dividends must at its core provide a stable source of revenue to both maintain its business and pay its share of the profits toward shareholders virtually in perpetuity. Without a healthy economy to ensure profits, dividend-paying companies suffer. As a result, it is expected that a dividend-based strategy would under-perform during a downturn based heavily on stock value.

However, it is also known that downturns are how dividend investments outperform growth investments. Because dividends rely on the number of stocks owned and not the stock value, a drop in stock value is encouraged over stock gains. This provides a considerable opportunity to obtain higher amounts of shares than would normally be provided during a growing economic environment.

There will be further drops in the upcoming months as cases of COVID-19 continue to spike and force reversals of state re-openings, and as such, continuing to invest into sound companies during this time will prove lucrative to future prospects after the crisis is over and the economy begins its recovery.

Portfolio Update

The S&P 500 Dividend Aristocrats list has been updated for 2020. 1 company has been removed following a dividend cut in May:

Consumer Discretionary (1)
Ross Stores (ROST) - Specialty Retail

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Last Week's Update (July 3rd, 2020)
M1 Finance Platform Referral Link: https://m1.finance/UIl_N9XNA_CO
M1 Finance Dividend Aristocrats 2020 Pie: https://m1.finance/quB1JH2k6

M1 Finance Portfolio: Dividend Aristocrats 2020 - Week 38 (July 3rd, 2020 - $630.81)

Week 38 - $630.81

Stocks rebounded during the shorter trading week as more positive reports on job gains last month boosted hopes of an economic recovery despite many states halting or even reversing business re-openings amid new surges of coronavirus cases.

Total Report (Since October 11th, 2019)

Positive Performing Sectors
1. Materials (+12.45%)
2. Healthcare (+7.79%)
3. Consumer Staples (+5.06%)
4. Industrials (+1.96%)
5. Information Technology (+1.91%)

Negative Performing Sectors
6. Consumer Discretionary (-0.24%)
7. Financials (-8.25%)
8. Utilities (-13.06%)
9. Real Estate (-14.27%)
10. Communication Services (-15.91%)
11. Energy (-20.42%)

Weekly Report (July 3rd, 2020)

Positive Performing Sectors
1. Materials (+4.30%)
2. Utilities (+4.30%)
3. Healthcare (+3.03%)
4. Industrials (+2.99%)
5. Real Estate (+2.82%)
6. Consumer Discretionary (+2.19%)
7. Information Technology (+2.13%)
8. Communication Services (+1.25%)
9. Consumer Staples (+0.92%)

Negative Performing Sectors
10. Financials (-0.81%)
11. Energy (-1.58%)

GICS Sector Performance Ratio - Balanced: From  0:11 (0.00%) to 9:2 (81.82%)

Review

News on further gains in employment have strengthened investor confidence that an economic recovery is still underway, even as states face strong rises in coronavirus cases that have caused suspensions or even reversals of economic re-openings. Both the state and federal governments have shied away from contemplating a second closure of the economy thus far: the economic fallout would be far greater than that of the first.

Yet the reality of the situation is coming close to realizing a second economic shutdown, if not fully so. Early re-openings have contributed immensely to the sudden uptick in new infections, much more so than the initial surge seen back in March and April, and it is expected that these numbers will continue to spike so long as businesses are allowed to operate during the crisis. However it is unlikely that either the states or the federal government will backpedal on their decision to focus on an economic recovery over the containment of COVID-19 until it is too late to reasonably do so.

Government guidance insofar have been unreliable at best: failure to aggressively contain the virus during the initial outbreak contributed to widespread cases of community spread. The lack of infrastructure, planning, and logistics to ramp up production of vital medical equipment and testing of potential infected eventually forced the use of a nationwide lockdown to stand in for this massive shortage. Much of these measures has been reactive as opposed to proactive, and it is likely that the current surges will see similar results if drastic measures are not taken. The markets have nearly recovered back to its January highs, yet they still do not match the current state of the economy yet. Half of the year has gone by with nearly all of it under lockdown. If the crisis continues onto next quarter, it is likely the economy will crash once more as consumer spending and business reverse course.

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Last Week's Update (June 26th, 2020)
M1 Finance Platform Referral Link: https://m1.finance/UIl_N9XNA_CO
M1 Finance Dividend Aristocrats 2020 Pie: https://m1.finance/quB1JH2k6