Solyco Wealth Model Portfolios Endured 2Q22 to Maintain Outperformance Since Inception

While the 2022 downdraft for risk assets accelerated in 2Q22, the four model portfolios managed by Solyco Wealth remained, after fees, ahead of their benchmarks and the S&P 500 for seven of eight observations year-to-date (YTD) and since inception (SI). Year-to-date only the Conservative Model Portfolio, after a 0.50% fee, lagged its benchmark, doing so by 32 basis points (bps), or 0.32%. Performance after fees for all four portfolios– Conservative, Moderate, Moderately Aggressive, and Aggressive – exceeded that of the S&P 500 YTD led by the Moderately Aggressive Model Portfolio outdistancing the index by 809 bps, or 8.09%.

Stock-picking remained the driver of outperformance for Solyco Wealth across all time frames. The equity weightings in the portfolios, before fees, averaged exceeding the performance of the S&P 500 for the 2Q22, YTD, and SI periods by 32 bps, 397 bps, and 586 bps, respectively. Average returns for the fixed income holdings of the portfolios, by comparison, lagged those of the Bloomberg US Aggregate Bond Index by 336 bps for 2Q22, 103 bps YTD, and 47 bps SI, before fees.

Over the course of 2Q22, Solyco Wealth made very few changes to the four portfolios, consistent with the attentive portfolio management approach employed since the inception of operations on September 9, 2021. Across the four portfolios we reduced exposure to the Information Technology and Health Care sectors late in 2Q22, primarily by exiting positions in Taiwan Semiconductor, Humana, and Cigna, across the portfolios. Concurrently, we increased Industrials and Energy exposures with the additions of agriculture and construction equipment manufacturer Deere & Co. and petroleum refiner Marathon Petroleum. Over the course of more than three quarters of managing the portfolios, Solyco Wealth averaged making fewer than two changes to portfolio holdings per quarter. Holding approximately 30 total positions in individual equity and fixed income exchange traded funds (ETF) in each portfolio, Solyco Wealth remains committed to maintaining relatively concentrated, research-driven portfolios.

Conservative Model Portfolio

Returning (11.08%) YTD and (9.49%) SI after fees, the Solyco Wealth Conservative Model Portfolio YTD lagged its benchmark by 32 bps but exceeded it by 140 bps SI. As compared to the S&P 500, Conservative posted outperformances of 888 bps YTD and 575 bps SI. Equities in the Conservative Model led the S&P 500 across all time periods while fixed income ETFs in Conservative lagged the Bloomberg US Aggregate Index performance only in 2Q22, outperforming YTD and SI, as shown in a table on the following page.

Indicative of how poor 2Q22 was for stocks and bonds, only two holdings of the Conservative Model Portfolio posted positive contributions for the quarter: American Tower (+3.1%) and TotalEnergy (+0.5%). Amazon, down over 36% in 2Q22, defined the worst performer in the Conservative Model Portfolio. For the YTD and SI time periods Energy holdings Schlumberger and TotalEnergy remained the largest positive contributors to the portfolio as they have largely since inception.

Solyco Wealth Conservative Model Portfolio Comparative Performance: 2Q22, TYD, and Since Inception
    2Q22 Year-to-Date Since SW Inception
Benchmarks S&P 500 -17.41% -19.96% -15.24%
Russell 3000 -17.96% -21.10% -17.66%
MSCI All-World ex-US -15.85% -19.32% -20.92%
Bloomberg US Agg Bond -4.63% -10.35% -10.85%
Conservate Model Portfolio Portfolio -8.56% -11.08% -9.49%
Benchmark -6.38% -10.76% -10.90%
   +/- Benchmark -2.18% -0.32% 1.40%
   +/- S&P 500 8.85% 8.88% 5.75%
   +/- Equities vs. S&P 500 2.00% 3.88% 5.40%
   +/- Fixed Income vs. Agg -2.24% 0.31% 1.34%

The above table reflects a 1% annual management fee, or 0.89% since exception and 0.50% year-to-date through 6/30/2022. Actual client investment performance likely will differ from respective model portfolio performance due to several factors including: 1) Timing of securities purchases and sales, 2) Dividend reinvestment choices, 3) Securities held outside the model portfolio, 4) Weighting differentials for certain securities relating to whole versus partial share accounting, 5) Timing and pricing of rebalancing actions, and other minor factors.
Conservative benchmark = total returns for 10.0% Russell 3000 Index, 65.0% Bloomberg US Aggregate Bond Index, and 10.0% MSCI World ex-US Index and 15.0% cash allocations.

Moderate Model Portfolio

Returning (12.68%) YTD and (8.99%) SI after fees, the Solyco Wealth Moderate Model Portfolio outperformed its benchmark by 106 bps YTD and by 457 bps SI. As compared to the S&P 500, Moderate posted 728 bps of outperformance YTD and 625 bps SI. Equities in the Moderate Model fell below the S&P 500 in 2Q22 but led the index by 382 bps YTD and 797 bps SI. Moderate’s fixed income position lagged performance for the Bloomberg US Aggregate Index across all time periods: 287 bps in 2Q22, 60 bps YTD, and 3 bps SI.

Five equities in the Moderate Model Portfolio remained positive for the YTD and SI periods: Lockheed-Martin, Pioneer Natural Resources, Schlumberger, Traveler’s, and Vertex Pharmaceuticals. Amazon offered the stiffest headwind for Moderate’s performance. None of the eight fixed income holdings in Moderate offered a positive contribution YTD or SI, a testimony to the disastrous environment for that asset class thus far in 2022.

Solyco Wealth Moderate Model Portfolio Comparative Performance: 2Q22, TYD, and Since Inception
    2Q22 Year-to-Date Since SW Inception
Benchmarks S&P 500 -17.41% -19.96% -15.24%
Russell 3000 -17.96% -21.10% -17.66%
MSCI All-World ex-US -15.85% -19.32% -20.92%
Bloomberg US Agg Bond -4.63% -10.35% -10.85%
Moderate Model Portfolio Portfolio -11.46% -12.68% -8.99%
Benchmark -9.68% -13.74% -13.56%
   +/- Benchmark -1.78% 1.06% 4.57%
   +/- S&P 500 5.94% 7.28% 6.25%
   +/- Equities vs. S&P 500 -0.03% 3.82% 7.97%
   +/- Fixed Income vs. Agg -2.87% -0.60% -0.03%

The above table reflects a 1% annual management fee, or 0.89% since exception and 0.50% year-to-date through 6/30/2022. Actual client investment performance likely will differ from respective model portfolio performance due to several factors including: 1) Timing of securities purchases and sales, 2) Dividend reinvestment choices, 3) Securities held outside the model portfolio, 4) Weighting differentials for certain securities relating to whole versus partial share accounting, 5) Timing and pricing of rebalancing actions, and other minor factors.
Moderate benchmark = total returns for 22.5% Russell 3000 Index, 45.0% Bloomberg US Aggregate Bond Index, and 22.5% MSCI World ex-US Index, and 10.0% cash allocations.

Moderately Aggressive Model Portfolio

Returning (11.84%) YTD and (7.15%) SI after fees, the Moderately Aggressive Model Portfolio after fees outperformed its benchmark by 388 bps YTD and by 810 bps SI. As compared to the S&P 500, Moderately Aggressive posted 812 bps of outperformance YTD and 809 bps SI. Across all three time periods – 2Q22, YTD, and SI – the performance of equities in the Moderately Aggressive Model exceeded that of the S&P 500, driving 907 bps of outperformance SI. While Moderately Aggressive’s fixed income position lagged performance for the Bloomberg US Aggregate Index by 381 bps in 2Q22, contributions from the asset class YTD and SI outdistanced the index by 20 bps and 154 bps, respectively.

Tech holdings Autodesk, Applied Materials, and Advanced Micro Devices, and Cable and Entertainment companies Comcast and Paramount, each declined by more than 33% SI for the Moderately Aggressive Model. However, oil and gas producer Pioneer Natural Resources and lithium and fertilizer concern Sociedad de Quimica y Minera each generated 60%+ contributions to the portfolio. None of the eight fixed income holdings in Moderately Aggressive, despite exceeding performance of the fixed income benchmark index for two of the three displayed time periods, offered a positive return for any of the 2Q22, YTD, or SI, periods.

Solyco Wealth Moderately Aggresive Model Portfolio Comparative Performance: 2Q22, TYD, and Since Inception
    2Q22 Year-to-Date Since SW Inception
Benchmarks S&P 500 -17.41% -19.96% -15.24%
Russell 3000 -17.96% -21.10% -17.66%
MSCI All-World ex-US -15.85% -19.32% -20.92%
Bloomberg US Agg Bond -4.63% -10.35% -10.85%
Moderately Aggresive Model Portfolio Portfolio -13.02% -11.84% -7.15%
Benchmark -12.14% -15.72% -15.24%
   +/- Benchmark -0.88% 3.88% 8.10%
   +/- S&P 500 4.38% 8.12% 8.09%
   +/- Equities vs. S&P 500 0.99% 6.40% 9.07%
   +/- Fixed Income vs. Agg -3.81% 0.20% 1.54%

The above table reflects a 1% annual management fee, or 0.89% since exception and 0.50% year-to-date through 6/30/2022. Actual client investment performance likely will differ from respective model portfolio performance due to several factors including: 1) Timing of securities purchases and sales, 2) Dividend reinvestment choices, 3) Securities held outside the model portfolio, 4) Weighting differentials for certain securities relating to whole versus partial share accounting, 5) Timing and pricing of rebalancing actions, and other minor factors.
Moderately Aggressive benchmark = total returns for 32.5% Russell 3000 Index, 25.0% Bloomberg US Aggregate Bond Index, and 32.5% MSCI World ex-US Index, and 10.0% cash allocations.

Aggressive Model Portfolio

The negative returns YTD (17.02%) and SI (13.58%), after fees, generated by the Solyco Wealth Aggressive Model Portfolio provide direct evidence of the abhorrent environment for investors in 1H22 as Aggressive still outperformed its benchmark by 168 bps YTD and 432 bps SI and the S&P 500 by 294 bps YTD and 166 bps SI. The 5% of Aggressive allocated to Fixed Income, equally divided between short-term high yield bonds and emerging market government debt, lagged the Bloomberg US Aggregate Bond Index by >400 bps YTD and SI. Performance for Aggressive’s equities, however, continued to outpace that of the S&P 500 by more than 1% in 2Q22, 6% YTD and 9% SI.

Although the 65.1% SI return for Earthstone Energy continued to pace the Aggressive Model Portfolio, that stock declined 28.5% in the final month of 2Q22. Oilfield services leader Schlumberger, a 30% positive contributor SI, similarly saw its shares give back 25.5% in June 2022. These moves lower substantially undermined Aggressive’s performance for all time periods. Sociedad de Quimica y Minera with a +64% contribution SI and Vertex Pharma at a +46.6% SI return, however, positively contributed to the portfolio, which needed it to make up for the horrendous performances of Shopify (77.3%), YETI (55.3%), Paramount (38.4%), and Comcast (33.9%), to start 2022.

Solyco Wealth Aggresive Model Portfolio Comparative Performance: 2Q22, TYD, and Since Inception
    2Q22 Year-to-Date Since SW Inception
Benchmarks S&P 500 -17.41% -19.96% -15.24%
Russell 3000 -17.96% -21.10% -17.66%
MSCI All-World ex-US -15.85% -19.32% -20.92%
Bloomberg US Agg Bond -4.63% -10.35% -10.85%
Aggresive Model Portfolio Portfolio -17.29% -17.02% -13.58%
Benchmark -15.44% -18.70% -17.90%
   +/- Benchmark -1.85% 1.68% 4.32%
   +/- S&P 500 0.12% 2.94% 1.66%
   +/- Equities vs. S&P 500 -1.66% 1.79% 1.42%
   +/- Fixed Income vs. Agg -4.52% -4.03% -4.18%

The above table reflects a 1% annual management fee, or 0.89% since exception and 0.50% year-to-date through 6/30/2022. Actual client investment performance likely will differ from respective model portfolio performance due to several factors including: 1) Timing of securities purchases and sales, 2) Dividend reinvestment choices, 3) Securities held outside the model portfolio, 4) Weighting differentials for certain securities relating to whole versus partial share accounting, 5) Timing and pricing of rebalancing actions, and other minor factors.
Aggressive benchmark = total returns for 45% Russell 3000 Index, 5.0% Bloomberg US Aggregate Bond Index, 45% MSCI World ex-US Index, and 5.0% cash allocations.