The All Terrain Portfolio™ has seen long-term trend changes in multiple asset classes this month. These long-term changes manifested quickly – just last month these asset class were indicating only short-term changes. Here’s a quick recap of each asset class:
Domestic Equity
Divergence in the U.S. stock market has our attention. Inflow and outflow analysis shows that money has been consistently exiting U.S. stocks for months now. Despite this, new record highs were achieved just last week. This theme of market confusion and anxiety continued as Federal Reserve Chairwoman, Janet Yellen, recently made statements that were the most hawkish in recent memory on raising interest rates despite poor economic data from the first quarter. She has previously adhered to a cautious, wait-and-see approach on this topic. All eyes still remain on the Fed.
Foreign Equity
Instability in Greece and a frothy Chinese stock market does raise some concern about global stocks. However, because of easy monetary policy by the European Central Bank and Bank of Japan, investors have gravitated toward global equities as they exit U.S. equities. Our indicators are currently all green in foreign markets
Real Estate
Real estate received red arrows from our short-term indicators due to an end-of-month collapse in April. That momentum has lingered and continued through May as well. Much of the U.S. real estate market is corporate, and with recent weak corporate earnings data and looming interest rate hikes, investors seem wary. Our long and short-term indicators now both read red.
Commodities
Despite oil finding some stability as of late, it is only a portion of the commodities broad basket sector and commodities as a whole just can’t fend off the dollar. The short-term positive momentum that was built over the last few months in commodities was quickly erased by a quick recovery of the dollar. As long as the dollar is strong, our indicators will dictate that we stay out of this investment class.
Fixed Income
Dividend yield is hard to come by in the fixed income sector with a low interest rate environment like our current one. Although we’ve had recent success with a heavy corporate holding in fixed income, that run has come to an end with the current erosion of confidence in U.S. corporations due to poor earnings reports. Because there are only weaker options in this sector, our indicators suggest we sit this sector out for the time being.
Data as of market close 5/29/15
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photo by Kris Sage
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