Quiet the Noise (Listen to the Data)
Below you will find a “temperature reading” on the market and the risk level on the “field.”
Relative Strength Line Up of the Asset Classes:
- Domestic Equity (Overweight)
- International Equity (Overweight)
- Fixed Income
- Foreign Currency
- Commodity (Void)
1/15/2013: (All Unchanged since 3Q 2013)
- #1 Asset Class: Domestic Equities
- #2 Asset Class: International Equities
- Market Status: BULL
- NYSE Bullish Percent: 68% Defense
It’s A New Year! NO Predictions Here—Just Follow the Leader
Upon reaching the beginning of a new calendar year an impulsive trend takes hold and we see expert and armchair experts engage in the practice of predictions. It happens every year, it comes in various forms, and arrives with the dependability of your neighbors every time you risk getting the paper in your PJs. Some of these predictions are relatively innocuous, as few people are likely to adjust their savings or spending habits dramatically based upon the bold predictions from the people at various fine dining magazines as to what the up-and-coming trends at local eateries will be this year. Others are a bit more esoteric and seemingly put out there for the shock value. Still others offer investment predictions that often result in outcomes both unexpected by the prognosticator, or unpalatable by the investor.
The best part about predictions in the “New Year” is that very few people let the inaccuracy of last year’s predictions have any bearing upon their gusto for this year’s prognostication. The issue is not really that their predictions have been so horrible, but rather that predictions of any kind in the market often have undesirable outcomes when an “of the year” moniker is attached. In my view, sound portfolio management should not be about predicting what will happen from now until the end of some Gregorian calendar that was established a few hundred years ago. My approach to investing is instead based upon finding leadership in the market, and attaching a discipline that offers rules for accepting that a trend is no longer working for me. My discipline is based upon the irrefutable economic principles of supply & demand, and dictates that I adapt into assets controlled by demand and away from those controlled by supply. In the end, this philosophy means that while others spend the month of January predicting, I spend the 12 months of the year listening to the market and adapting to changes.
With that said, 2013 will go down in the history books as the 10th best performing year for the US Equity market (as defined by the S&P 500 Index), and it was the 24th year since 1928 that the S&P 500 gained 20% or more. That’s right, there have been 23 previous occurrences of the S&P 500 gaining more than 20% in a single year, which means roughly 28% of the past 86 years have seen gains of more than 20%. The last time the S&P 500 gained more than 20% in a single year was 2009 and before that was 2003.
That’s all well and good, but more importantly, what does this mean for the coming year? Out of the 23 years following a 20% or greater return, 15 of the years have been positive and 8 of the years have resulted in losses for the S&P 500. In other words, about 65% of the time a year following a 20% plus return for the S&P 500 is a positive year. Further, there were 5 years the S&P 500 followed up a 20% plus year with another 20% plus year (1936, 1955, 1996, 1997, and 1998).
One of the major themes that is in place at the start of 2014 is the leadership of Domestic Equity, or “stocks.” Out of the six broad asset classes that I track, Domestic Equity remains the top ranked asset class, and that continues to be the case today. In other words, this continues to be a strong area of the market and one that I will continue to focus on. Additionally, nearly 75 percent of all stocks trading on the New York Stock Exchange are in a positive trend today, which is to say that the majority of stocks continue to show positive trends. I should note, also, that all of the major equity indices continue to trade in a positive trend, which is another positive sign for the market.
My challenge continues: to ensure that 100% of our clients GET our “follow the leadership” philosophy. Let us know how we are doing! If you have any questions about the particulars of your portfolio, or would like to discuss the potential opportunities that I have seen arise within the equity market, please click here to email me and let’s connect!
Happy New Year, and above all, thank you for another great year together!
2013 Performance and New Models Rolled Out
Mostly in response to our 401k clients, Red Triangle/Alphavest rolled out 10 new Models for clients to choose from. CHOOSE FROM?-Most of you may ask. Yes. Some clients (99.9% are 401k investors) prefer to have options and have a “say” in their account allocation. Most clients choose Red Triangle and Alphavest because they prefer us to choose for them. Have no fear—this hasn’t changed.
The Models, whether you decided to do some picking yourself, will enhance all clients’ performance, I am confident.
The Line Up:
* Best of Buffett * Defensive Strategy * Long/Short * Globe Trotters * Dogs of the Dow
* Dividend Yield * Healthcare * REITs * Analyst Upgrades * Ivy Leaguers
Performance of our “CORE Models” for 2013:
Information on all the models can be found on the Alphavest website, or by emailing us. Thank you for you patience as our site is currently undergoing a face lift!
New Edition: Book Club
What is Cokie reading now?
The Shadow of the Wind; CR Zafon
The Road Less Traveled (2nd time!) MS Peck
David and Goliath; M Gladwell
Some ask, “What makes Red Triangle or Alphavest’s investment philosophy so different?” Or, “If you were to offer 1 thing investors should do to succeed….” and the answers is RULES.
I want to demystify the noise for investors and and help them break free from Wall Street’s games. One way to do this, beyond lowering fees and eliminating conflicts of interest is to abide by a rule-based, not an emotion or ego based investment methodology. At Red Triangle/Alphavest that’s what we do: FOLLOW THE RULES.
Last Quarter’s Rule in review:
Rule #1: Cash/Bear Market (Q3 2013 to review click here)
Rule #2: Cash/Offense-Defense NYSE Bullish Percent
If the NYSE Bullish Percent goes to DEFENSE (evidenced by a 6% reversal DOWN from it last signal), then typically, we raise 10-20% cash in all accounts.
HOWEVER, in markets where the top 2 performing asset classes are Domestic Equity and International Equity cash is NOT RAISED. Instead, Confirmation of this indicator would need to be one of these two asset classes falls to #3 on the Relative Strength Asset Scale.
Conversely, when the NYSE Bullish Percent reverses from DEFENSE to OFFENSE (evidenced by a 6% reversal UP from it last signal), then typically, we reinvest 10-20% cash in all accounts to reach a fully invested status.
The bottom line: We have you covered should the markets “exhale” or should we see a reversal of fortune—but not with a knee-jerk approach, but one that is solidly rooted in data and over 6 decades of history.
Subscribe to Cokie’s Blog for more frequent updates on Markets and Matters….
Most of my blogs are less than 200 words – short and sweet! I have 2 weekly posts — one is uber-short and the other highlights our Investment Management “Rules” with one Rule detailed each week.
Q4 Most Read Blogs:
- Investing, Trains and Hobos…Don’t OVERCOMPLICATE IT
- Weekly Post: Why NOT to Trade Your Own Account
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