Current Positions:
High Conviction Tactical Models*1:
Developed International Stocks: 100% Invested
High Yield Bonds: 100% Invested
US Stocks: 100% Defensive
Investment Grade Bonds: 100% Cash Equivalents
Managed Risk: Approximately 2.9% out of the money (LEAP on SPX Futures Put strike price)
Equity Portion of Defensive Alpha Models*:
33.3% Bullish Posture†
Recent Trades and Current Positions
Our trend-following algorithms moved us back to a fully invested position in our High Yield Bond allocations. That trade concluded on Friday, and we begin the week fully allocated to High Yield Bonds. Currently, our International Developed Stock positions are invested and our US Stock positions are defensive.
The market began the week approximately 2.9% above its put strike price in our Managed Risk Model (we rolled the leap on SPX Futures lower at year end).
Market Environment
Markets continued to advance last week. Challenging the advance will be Thursday’s CPI release and the earnings reports, which begin to arrive this week and include several big banks on Friday.
Although the consensus of Wall Street strategists call for the S&P 500 to end 2023 at 4,009i, roughly where it is now, Morgan Stanley’s Mike Wilson came out with a research note this morning predicting a 22% drop in this year based on perceived declining earningsii. The challenge, in our opinion, for advisors is not just to mitigate losses, but position portfolios to be agile in the face of changing markets.
Our advice, regardless of market direction moving forward remains:
- Leave conventional bonds in favor of unconstrained bond strategies that can move to ultra-short duration bond positions, TIPS, or High Yield Bonds to attempt to minimize principal losses.
Our specific advice regardless of market direction moving forward remains:
- Move at least half of stock portfolios to hedged equity strategies that attempts to shift from market falls but have the ability to attempt to capture the rebound once the market bottoms.
- Leave conventional bonds in favor of unconstrained bond strategies that can move to ultra-short duration bond positions, TIPS, or High Yield Bonds to attempt to minimize principal losses.
We’ll keep you updated as our models react to market moves coming into the new year.
Happy Getting Kind of Old Year!
Toews Management Team
All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.
This commentary is intended to provide general information only and should not be construed as an offer of specifically-tailored individualized advice, and no representation is being made as to whether the information provided herein would be beneficial for any or for a specific Employer Benefit Plan or investor.
For additional information about Toews, including fees and services, send for our disclosure statement as set forth on Form ADV by contacting Toews at Toews Corporation, 1750 Zion Road, Suite 201, Northfield, NJ 08225-1844 or (877) 863-9726.
(1)These include the Toews Capital Preservation, Balanced, Balanced Income, Balanced Growth, Growth, and All Equity, High Income, Balanced Income, and Conservative Income portfolios. They do not reflect the allocations of these strategies that are not allocated to Toews Funds.
(*)Exposure to vehicles invested in the listed asset classes
(†)Approximate Defensive Allocation