The S&P500 Tests All-time Highs from January 2018

Earlier this week the S&P500 closed within a gnat’s eyelash of the all-time highs of January 2018. Last time, that’s where the sellers showed up.

It will be interesting to see if the sellers show up again and whether the sellers or the buyer win. September and October are historically not good for stocks, but the tendency is not strong enough to bet your portfolio on.

We’ll be watching closely to see what happens.

Have a great weekend.


Portfolio Wisdom Allocation Change on 7/30/18

Our allocations don’t usually change more than once every couple of months. However during market regime changes, our allocations may change more frequently … and that is a very good thing.

Yesterday, our model called for a reduction in TIPs and an increase in U.S. stocks and cash. Accordingly, we moved to over 50% allocated to stocks and about 20% cash in the model. TIPs, Gold, and International (non U.S.) stocks are all trending downward at this time.


Bonds Trending UP Again.

What does that say about the markets and the economy?

Everything the Fed has communicated has had to do with raising interest rates . . . and it has raised rates several times.

Nevertheless, Treasury Inflation-Protected Securities (TIPs), as an asset class, are trending up again (over the last 6 months). Our asset allocation model adjusted holdings as of yesterday (Monday, July 16). Gold and International Stocks are also trending down, while US stocks, both large cap and small cap are trending up. Since we now have three asset classes in an uptrend, we are reducing cash to 5% of our portfolio allocation.


2018 is Half Gone

Hard to believe how fast this year is passing by. US Large cap stocks, Gold, Non-US stocks, and TIPS (Treasury Inflation-Protected Securities) are all trending down over the last six months or so. Small cap US stocks is the only asset class that is trending up for the first six months of the year.

Gold is down the most so far this year, of all five asset classes. It is bouncing today, but down about 4.8% YTD. The S&P is up 2% or so YTD.

You may ask “How are large cap US stocks trending down when we are up 2% on the year”? Well I’m glad you asked! I use the linear regression slope (a statistical way of determining the trend) of the weekly open, high, low, and close going back about six months. And, don’t forget, the S&P-500 was up 10% or so at the end of January. It has given back most of those gains since then, with a bumpy ride along the way.

So there you have it … a definitely “half empty” kind of mid-year report card.

Our economic fundamentals are starting to fade, and the tariffs on imports from China, Europe and elsewhere are making investors cautious.

We are holding 15% in cash and our biggest position is in the smaller US stocks.

Have a great 4th of July.


Wow, Gold was Really Hammered Last Friday!

A couple of weeks ago, my asset allocation methodology substantially reduced our allocation to gold (for our conservative and moderate clients) and I wrote about it on this blog. I was reluctant to do so, because I felt sure that gold was about to take off. However, I’ve learned to trust my process, and I reduced gold and added to small cap US stocks.

Well Small cap US stocks have increased 2.6% percent since the change, and gold has dropped. Thank goodness I stuck to my discipline!

And Friday, gold dropped another $23/ounce, ending the day at around $1278. / oz. Ouch. Thankfully, our portfolios benefitted both ways.

Given the last 10 years of US monetary policy and our debt, gold will rise again. . . But we’ll wait until our methodology calls for a larger gold allocation to do more than re-balance portfolios at the current allocation targets.



U.S. Small Cap Stocks are Trending UP!

Last week, I noticed that gold looked like it was entering a downtrend and would be reduced based on our dynamic asset allocation model. Sure enough, gold is trending down slightly and receives a smaller allocation, as of yesterday.

However, to my surprise, Monday’s asset allocation model showed an increase in the allocation to U.S. small cap stocks because that trend has turned positive. Accordingly, we have reduced gold and increased U.S. Small Cap stocks.


Another Asset Class (Gold) May Be Entering a Downtrend

I’m seeing indications that gold will be in a downtrend by this coming Monday, joining US Stocks, International Stocks and Bonds. I don’t recall seeing ALL of our asset classes in downtrends more than once before. This is not a good thing for portfolios. It basically means that many investors are raising cash, and we should too.

We are already at 15% cash in our diversified portfolios. That cash position will be increasing to 50% on Monday if, indeed, gold’s linear regression slope is negative over the last six months or so.

Risk, both in terms of volatility and trend, is increasing.


Allocation Change at Portfolio Wisdom

As of Monday, 5/21/18, the medium-term trend turned down for Small Cap US  Stocks.

Now, the only asset class in our portfolio in an uptrend is gold (GLD or SGOL). All bond classes and all stock classes are trending down.

Accordingly, I reduced stock holdings, increased gold holdings, and increased cash to 15% of our portfolios. (For my diversified clients, we continue to hold a 5% position in the gold miner ETF, GDX). For my speculative clients, we are primarily in precious metals, buying on dips and selling on rallies around the core positions.

Any Question? Call me at 615-414-1942.