Time to read: 4 minutes |
This week we trimmed equity holdings on all of our portfolios. Since early 2016, Stratos Private Wealth accounts have owned equities in excess of their respective benchmarks. This bullish stance has corresponded with a period of strong stock market performance. Our changes this week reduced stock holdings to our benchmark weighting in each of our portfolios (between 4% and 10%, depending on the investment objective).
We continue to view market action in 2018 as a “tug of war”. A strong economy and corporate earnings in the U.S. seek to pull markets higher. However, rising interest rates and increased risks for domestic policy mistakes loom. Today, we find the weight of the evidence indicates the two sides are evenly matched. For this reason, we bring our portfolio strategies back to benchmark equity weighting while we continue to watch our objective indicators to signal a change in either direction.
In addition, we have moved to an underweight (less than our benchmark allocation) position in international equities. Valuations abroad do appear favorable compared to domestic stocks. However, tactical indicators show clear signs of deteriorating momentum in international stock markets. This is even more pronounced when compared to U.S. equities.
Many of our clients are familiar with one of our tactical rules for investing, “Don’t fight the trend”. The chart below highlights the breakdown in international stock momentum – one reason we’re underweight foreign equities.
The blue line above (top clip of the chart) represents the global stock market (excluding U.S. companies). The red line (bottom clip of the chart) measures the momentum of international stocks. As can be seen, the red line is approaching our bearish zone where international equities have historically performed poorly.
Stratos Private Wealth is a division through which Stratos Wealth Partners, Ltd. markets wealth management services. Investment advisory services offered through Stratos Wealth Partners, Ltd., a registered investment adviser. Stratos Wealth Partners and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only; and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision. Investing involves risk including possible loss of principal. Some of the information contained herein has been obtained from third party sources which are reasonably believed to be reliable, but we cannot guarantee its accuracy or completeness. The information should not be regarded as a complete analysis of the subjects discussed.
