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 6% in the money (LEAP Put strike price)
Equity Portion of Defensive Alpha Models*:
33% Bullish Posture†
Recent Trades
We began moving our US Stock Positions defensive on Wednesday of last week. On Friday we completed those trades and start this week fully defensive in US Stocks. Developed International Stocks and High Yield Bonds remain fully invested.
Our Managed Risk model starts the week approximately 6% below its put strike (in the money), meaning this put should continue to help offset additional market losses.
Market Environment
The final market week tends to be trade with relatively low volumes, which means that a small amount of volume can lead to outsized market moves. A few points to lead into year-end:
- Stock valuations are still elevated by almost any measure, which creates vulnerability for further losses coming into the new year. With the favorable seasonality of the 4th quarter coming to an end, advisors should weigh allocation decisions with a focus on managing risk for vulnerable investors.
- Interest rates begin the year at decent nominal levels. For the first time in years, holding a defensive posture can mean potentially realizing yields of north of 4%. This also means that TIAA (There Is An Alternative) may be the new relevant acronym.
- The FED seems determined to bring markets lower and unemployment higher. That may present additional challenges for both stock and bond markets moving forward.
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 ultrashort
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 New 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