Market Update 2/16/23

Market Update 2/16/23
February 16, 2023 phillip_toews_1p9l0e9h

On February 2nd, I was invited to appear in Bloomberg Markets segment on Bloomberg TV to comment on the markets. My final comment was that the 10-year Treasury Yield was headed back to 4%. That appears to have been prescient as yields stretch higher, and the conversation shifts from soft-landing to possibly no landing.

So, what are we worried about then if no recession is on the horizon, or do we need to be worried about anything? It’s worth understanding that the backdrop for all of this is record global debt, and this is the most un-talked about reality of the markets today. Historically, high debt levels have created long term market fizzles (Japan) or market blow-ups (financial crisis), and it’s unprecedented globally when compared to GDP. The MOST IMPORTANT takeaway (that I’ll discuss more in the coming months) is that when the all-clear sign is lit, volatility is low, but the debt level is very high, sometimes the greatest risks are present.

You can listen to my segment at 4:52 here.

Our trend-following algorithms moved us back to a fully defensive position in our High Yield Bond Allocations this week (the final trade was completed at yesterday’s close). However, our Equities remain in a bullish posture. This trade has been influenced by rising yields across the bond-sphere over the past week.

The markets opened today approximately 8% above the put strike price in our Managed Risk Model (we rolled the leap on SPX Futures lower at year end). If we move higher above this Put, gain potential relative to the market may increase.

Current Positions:

High Conviction Tactical Models*1:
Developed International Stocks: 100% Invested
High Yield Bonds:  100% Defensive
US Stocks: 100% Invested
Investment Grade Bonds:  100% Cash Equivalents
Managed Risk: Approximately 8% out of the money at Friday’s market close (LEAP on SPX Futures Put strike price)

Equity Portion of Defensive Alpha Models*:
100% Bullish Posture

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(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