On May 2 I posted that you should consider using the QQQQ and consider avoiding IEF as the former (equities) was acting stronger and the latter (fixed income) was acting weaker. What a difference a few weeks make. Unlike some other financial news outlets, when we are wrong, we put it at the top, first thing. There is nothing wrong with being wrong when investing; the problem occurs by not admitting you are wrong. If something you do isn't working, or things go the opposite of what you thought they would, admit it and adjust accordingly.
So what happened over the past three weeks. First, international equities dropped out of favored status. Then, this week domestic equities fell out of favored status. Finally, equities have lost in relative strengths when compared to bonds. All together this means fixed income is an area to consider and for your equities you need to selective as we may see further weakness in that area. One thing to note, the correction earlier this year did not give us these levels of indications. This is why we feel there are increased risks at this point.
Finally, we have a subscriber service where we email out our portfolio as we adjust. I'm going to give a quick glimpse here as to how we are adjusting based on the above. We are reducing equity exposure to about 40% with the rest split between cash and investment grade bonds. We have one more bogey for equities and should that fail we will move down to between 0 and 25% equity exposure. If you are interested in learning more about the subscriber service, contact me and I can give you more information.
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