Bulls “Rush In” With More Stimulus On The Way

Please pay attention to interest rates; they are likely telling you a lot more than you think.

Portfolio Update

Last week we concluded our missive stating:

As discussed previously, ‘risk happens fast.’

It is essential not to react emotionally to a sell-off. Instead, fall back on your investment discipline and strategy. Importantly, keep your portfolio management process as simplistic as possible.

  1. Trim Winning Positions back to their original portfolio weightings. (ie. Take profits)
  2. Sell Those Positions That Aren’t Working. If they don’t rally with the market during a bounce, they will decline more when the market sells off again.
  3. Move Trailing Stop Losses Up to new levels.
  4. Review Your Portfolio Allocation Relative To Your Risk Tolerance. If you have an aggressive allocation to equities at this point of the market cycle, you may want to try and recall how you felt during 2008. Raise cash levels and increase fixed income accordingly to reduce relative market exposure.”

While this may indeed turn out to be a buying opportunity in the short-term, mainly if the Government passes the next “stimulus bill,” cleaning up your portfolios allows you to adjust to the markets next advance.

Fortunately, that is what happened this week as the passage of the stimulus bill sparked bullish spiritsAs noted, we reviewed our portfolios and increased exposure to fundamentally strong stocks we are holding long-term. We also added to some of our beaten-up “momentum” names.

We are still slightly overweight cash but very short on duration in our bond portfolios for now. Such puts us a little more exposed to risk than we like, but the market is not giving us many options for now.

However, we will continue to follow our investment process for now and manage risk accordingly.


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.  



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