High Conviction Tactical Models*1:
Developed International Stocks: 100% Cash Instruments
High Yield Bonds: 100% Cash Instruments
US Stocks: 100% Cash Instruments
Investment Grade Bonds: 100% Cash Equivalents
Equity Portion of Defensive Alpha Models*:
100% Defensive Posture†
After being long US stocks for several weeks we began to move back defensive on Tuesday and finished moving defensive today at the market close.
At the end of first quarter, we also began to move to an invested posture in our High Yield Bond positions. However, after turning lower we discontinued acquiring high yield bonds. On Thursday of last week we moved to a fully defensive posture.
This trade means that we’re fully defensive across our platform once again.
While stocks have rebounded, High Yield Bonds largely have continued to decline due primarily to pressures from rising interest rates. High Yield bonds remain in cash equivalents, the best place to be in the fixed income space in our opinion.
Helping to drive risk assets lower has been the change in stance of the FED from a dovish posture earlier this year to a “slam on the brakes” posture currently, causing the 10-year yield to surge from 1.5% at the beginning of the year to 2.8%. This has caused losses in stocks as well as bonds, prompting losses in conventionally allocated balanced portfolios.
Market and economic dislocations caused by rising inflation and the war in Ukraine have caused a number of prominent economics to lower global GDP forecasts or make recession call. Our view is that the markets will lead lower if a recession scenario is realized.
We will keep you updated as our models react to market moves.
Toews Management Team
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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