Portfolio Positioning Update With the “Santa Claus” rally wrapping up next week, we are maintaining our long bias with reduced hedges at the moment. We made no changes to our portfolio mix during the past week except for adding a 5% weight of SPY to our current holdings. Once we pass the end of the next week, we will most likely reduce that position and rebalance the rest of our holdings. With the stimulus bill passed, and checks going out, we won’t be surprised to see a short-term pop in economic activity. However, given the checks are 50% smaller than the first round, along with extended unemployment benefits, the economic bump will be short-lived. The real question going into 2021 is whether President Biden can spend further into debt to do more stimulus. Or, will a shift toward
Lance Roberts considers the following as important: 401-k Plan Manager, Investing, newsletter, Technical analysis
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Portfolio Positioning Update
With the “Santa Claus” rally wrapping up next week, we are maintaining our long bias with reduced hedges at the moment.
We made no changes to our portfolio mix during the past week except for adding a 5% weight of SPY to our current holdings. Once we pass the end of the next week, we will most likely reduce that position and rebalance the rest of our holdings.
With the stimulus bill passed, and checks going out, we won’t be surprised to see a short-term pop in economic activity. However, given the checks are 50% smaller than the first round, along with extended unemployment benefits, the economic bump will be short-lived. The real question going into 2021 is whether President Biden can spend further into debt to do more stimulus. Or, will a shift toward fiscal responsibility begin to take hold? Much will depend on the Senate run-off outcome in Georgia.
Regardless, the evidence is mounting that economic and earnings data will likely disappoint overly optimistic projections currently. Furthermore, investors are way too confident. Historically, such has always turned out to be a poor mix for a continued bull market advance in the short-term.
We will continue to trade accordingly, but the extreme deviations in all markets from long-term fundamentals are unsustainable.
That is a problem the even the Fed can’t fix.
I wish you all a happy and prosperous New Year.
If you need help or have questions, we are always glad to help. Just email me.
See You Next Week
By Lance Roberts, CIO
Market & Sector Analysis
Analysis & Stock Screens Exclusively For RIAPro Members
S&P 500 Tear Sheet
The technical overbought/sold gauge comprises several price indicators (RSI, Williams %R, etc.), measured using “weekly” closing price data. Readings above “80” are considered overbought, and below “20” is oversold.
Portfolio Positioning “Fear / Greed” Gauge
The “Fear/Greed” gauge is how individual and professional investors are “positioning” themselves in the market based on their equity exposure. From a contrarian position, the higher the allocation to equities, to more likely the market is closer to a correction than not. The gauge uses weekly closing data.
NOTE: This week, I published the 4-Week Average of the Fear/Greed Index. It is a rarity that it reaches levels above 90. The current reading is 96.07 out of a possible 100.
Sector Model Analysis & Risk Ranges
How To Read.
- The table compares each sector and market to the S&P 500 index on relative performance.
- The “MA XVER” is determined by whether the short-term weekly moving average crosses positively or negatively with the long-term weekly moving average.
- The risk range is a function of the month-end closing price and the “beta” of the sector or market.
- The table shows the price deviation above and below the weekly moving averages.
Weekly Stock Screens
Currently, there are 3-different stock screens for you to review. The first is S&P 500 based companies with a “Growth” focus, the second is a “Value” screen on the entire universe of stocks, and the last are stocks that are “Technically” strong and breaking above their respective 50-dma.
We have provided the yield of each security and a Piotroski Score ranking to help you find fundamentally strong companies on each screen. (For more on the Piotroski Score – read this report.)
S&P 500 Growth Screen
Low P/B, High-Value Score, High Dividend Screen
Aggressive Growth Strategy
Portfolio / Client Update
That’s a wrap. It’s done. Stick a fork in it.
Whatever is your favorite saying, the year 2020 is finally over. The best part about 2020 is it won’t take much for 2021 to be a better year.
As we wrap up the year, we have positioned portfolios to take advantage of any bull market continuation. However, we know the potential risks of excess valuations, speculative risk-taking, and a leveraged market.
Therefore, we expect to continue managing risk in 2021 to maintain portfolio performance while reducing volatility and maintaining capital preservation. We have also done extensive work over the last several months modifying our models to absorb the new dynamic of direct stimulus to households. While such may seem to be beneficial in the short-term, the long-run effect of pulling forward consumption has always been negative.
However, between now and then, we will continue to position portfolios to participate in the market. Our focus remains to create returns consistent with your required “hurdle rate” to meet your long-term financial objectives.
Importantly, we look forward to continuing to serve you in the year ahead. We encourage you to reach out with any questions or concerns you have.
During the past week, we made minor changes to portfolios. We post all trades in real-time at RIAPRO.NET.
In anticipation of the seasonally strong period from Christmas to the first two days of January, we added some additional exposure to portfolios.
Increased our S&P Index trade for the year-end “window dressing” run in both models.
- Add 5% SPY bringing total position to 10%.
As always, we are aware of the risks and are carrying tight stops on this position.
Our short-term concern remains the protection of your portfolio. We have now shifted our focus to 2021 and where markets go in the New Year.
THE REAL 401k PLAN MANAGER
A Conservative Strategy For Long-Term Investors
Model performance is a two-asset model of stocks and bonds relative to the weighting changes made each week in the newsletter. Such is strictly for informational and educational purposes only, and one should not rely on it for any reason. Past performance is not a guarantee of future results. Use at your own risk and peril.
401k Plan Manager Live Model
As anRIA PRO subscriber (You get your first 30-days free), you can access our live 401k plan manager.
Compare your current 401k allocation to our recommendation for your company-specific plan and our 401k model allocation.
You can also track performance, estimate future values based on your savings and expected returns, and dig down into your sector and market allocations.
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