The All Terrain Portfolio™ has detected some rather abrupt market movements as of late. A global stock selloff has our indicators buzzing as our model continues to detect and manage risk.
Domestic Equity
After months of a nearly flatlined U.S. stock market, a major market move finally occurred. Stocks plummeted to close out last week and losses spilled into this week as all major indices are now in correction territory – more than 10% off their highs recorded earlier this year. This very quick, but clear movement has prompted our model to move out of the market and into cash. Global growth weakness is generally getting the blame for this current market sell off. It remains to be seen if this is “the big one” or simply a long overdue minor correction. From a technical standpoint, there are a few levels of support that must be breached before we’re ready to call this a bear market. That being said, the Fed has it’s hands full approaching their long anticipated decision to raise rates at this September’s mid month meeting. Will the Fed blink in the face of major market downturn? Or does a Fed rate hike even matter at this point? We’ll be closely monitoring as it all unfolds.
Foreign Equity
Everybody seems to be pointing the finger at China for this current global growth concern and consequently, our current global stock market dump. We’ve been mentioning China as cause for concern for months now due to equally unprecedented and desperate measures taken by its government and central banks. More attempts to save their economy and markets continued through August as China intentionally devalued their currency in an effort to prop up their stalling growth. The ripple effects from the yuan devaluation turned into tidal waves for emerging markets as their ability to purchase goods from China was dealt a crushing blow. The waves are now washing up on U.S. shores as domestic and foreign equities are falling sharply, in unison.
Real Estate
We mentioned last week that real estate had recently been on the rise while staring a potential rate hike in the teeth. This peculiar movement nearly had our indicators suggesting a buy in this sector, but those gains were quickly erased as real estate was no exception to the massive sell-off over the last two weeks. Real estate is comfortably back in sell territory, according to our model.
Commodities
The commodities route continues. A bottom is still not in sight, after months of falling prices. Oil is by far the headline in this group and has found itself at lows not seen in six years. Economists have speculated that low oil prices lead to low gas prices and consumers will put their savings at the pump back into the economy through consumption. This has yet to come to fruition as airlines seem to be the only benefactors of this oil slump. Precious metals continue to be unwanted by investors as there has been only minimal flight from stocks to gold or silver.
Fixed Income
The lone bright spot in the investment world is fixed income, for now. Investors have reluctantly moved to bonds from stocks during this current sell off. The tepid interest in bonds is for good reason. Bonds are actually still quite expensive considering their low yields and looming Fed rate hike. A rate hike will likely lead to a loss of value for current bonds as investors would sell to move into higher-yielding new bonds. Perhaps this is the reason, in addition stock market woes, many investors feel safer in cash right now.
Chart as of market close 8/25/15 Past performance is not indicative of future results. Other asset classes or investment vehicles may be used in client portfolios and client portfolios may not hold all positions of the model at the same time as the model. This chart and its representations are only for use in correlation to the proprietary timing model by Arkenstone Financial, Registered Investment Advisor. Actual client and All Terrain Portfolio(TM) positions may differ from this representation.
Want more info on the All Terrain Portfolio? Contact us here
- U.S. Stocks Make New Highs - December 6, 2024
- Rising Rates Create Headwinds - November 8, 2024
- The Fed Finally Cuts Rates - October 10, 2024
Leave a Reply