Current Positions:
High Conviction Tactical Models*1:
Developed International Stocks: 100% Cash Instruments
High Yield Bonds: 100% Defensive
US Stocks: 100% Invested
Investment Grade Bonds: 100% Treasuries and Cash Equivalents
Equity Portion of Defensive Alpha Models*:
70% Bullish Posture†
Recent Trades
On Wednesday this week, our trend following algorithm finished moving to a defensive posture for our High Yield Bonds allocations across our models2.
Although our US and International Stock positions remain invested, we are at or near target exit levels and may begin moving defensive soon if markets continue to deteriorate.
Options hedges are in place across a majority of our equities portfolios, helping to potentially offset losses prior to an exit. Also, we rolled up the puts in the past month in our Managed Risk portfolios, increasing the strike price to level that are currently in the money.
Market Environment
The recent bear market rally gained momentum following Powell’s July “neutral stance” comment. “Neutral” was received with skepticism by a large swath of investment managers considering the remaining challenges ahead to bring inflation down to reasonable levels. Recall that in 1982, confronted with rampant inflation, Paul Volcker oversaw rates moving as high as 20% before employment and money supply finally relented. It strikes us as ongoing denial that inflation is real and potentially lasting. First it was “transient.” Then conversation shifted to inflation potentially “peaking,” implying that might quickly recede.
Today’s speech at Jackson Hole moved us back onto a clearer path of tightening, opening acknowledging “some pain” ahead for the economy. With valuations still high and earnings potentially challenged, advisors should maintain a defensive stance coming into the fall months.
We’ll update you with any additional trades ahead.
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
(2) We held a minimal allocation of less than 4% that sold one day later on Thursday