4 Asset Model Portfolio


We have a sell signal in our fundamental bond model, yet the technicals in this asset class remain constructive.  Thus we are NEUTRAL on bonds.  We liquidated our position in BND at Monday’s open, and this position gained 1.45% since early January.  By comparison, equities (the SPY) have gained about 5% since January with a whole lot more volatility and uncertainty considering that valuations and sentiment are very stretched.  At some point, investors will be hitting themselves on the head wondering why they ever jumped into the markets at this juncture.

Let’s get back to bonds for a minute.  Articles are starting to creep into the financial press concerning inflation.  Is it contained?  Is the Fed behind the curve?  Our measures (unpublished data) show that inflation is on the rise.  The trend in year over year CPI is higher.  Thus we should expect Treasury yields to rise, and this should be a headwind for equities.  Our sell signal in our bond model is consistent with these observations.

We remain bullish on gold,  and last week I stated, “we find this asset in an attractive buying position”.  Gold had a great week.  Gold has been crushed over the past 24 months while equities have been on a tear.  One has to wonder if gold i

We remain neutral on crude oil.

4 Asset Model Portfolio: Performance 2013/2014

Our portfolio rules state: 60% of the funds are allocated towards equities when there is an equity buy signal. When equities are on a buy signal, the other 40% of the portfolio is divided up equally amongst the other assets. If equities are not on a buy signal, then the other assets get no more than a 20% allocation each. We do not use leverage.

The 4 Asset Model Portfolio spreadsheet is updated through Friday.

Figure 1. 4 Asset Model Portfolio/ spreadsheet


Closed positions from the 4 Asset Model Portfolio are shown in the next spreadsheet.

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