The risk budget is unchanged this month although the composition of the portfolio does change. For the moderate risk investor, the allocation between bonds, risk assets and cash remains at 50/45/5. There are changes to the allocation but the overall risk budget stays the same. Credit spreads did continue to narrow this month but other indicators did not confirm the [...]
I am raising the budget for risk assets this month. For the moderate risk portfolio, I am raising the risk allocation to 45%, reducing the bond allocation to 50% and adding a 5% cash position. The narrowing of credit spreads necessitated a move in the allocation as investors are clearly willing to take on additional risk right now. This is [...]
The risk budgets are unchanged again this month. For the moderate risk investor, the allocation between risk assets and bonds remains at 40/60. I struggled more with this decision than any in recent memory but in the end there just isn't sufficient evidence to make a change. Raising or lowering the allocation to risk assets right now would require making [...]
The risk budgets are unchanged again this month. For the moderate risk investor, the allocation between risk assets and bonds remains at 40/60. It was tempting to raise the risk allocation this month and up our allocation to the weak dollar investments we've favored for some time. But the only indicator that really improved was credit spreads and it was not [...]
One of the things I like about posts like the Chart of the Week is that it gets people to think, share and collaborate. It can be a bit of echo chamber sometimes so we welcome other opinions and feedback about our work. This chart of the week comes from reader Bradley Parkes, former investment banker and current geologist (Check [...]
The risk budgets are again unchanged for this month. For the moderate risk investor, the allocation between risk assets and bonds remains at 40/60. The changes in our indicators this month were not significant enough to warrant a change. Credit spreads stopped narrowing and have recently been widening again, ever so slightly. Valuations, long term momentum and the yield curve [...]
Global stock markets, especially in the US, have made a furious comeback from the lousy start of the year. At its worst level the S&P 500 was down 11% year to date and 15% from its peak late last spring. At that nadir the market was trading at roughly the same level as November of 2013, over two years of [...]
Credit spreads are a big input to our investment process. It was the widening of spreads that convinced us to reduce our equity allocation before the volatility of last year. But active asset allocation requires that you get two consecutive decisions correct and that isn't an easy task. Right now, for instance, we are watching spreads intently trying to figure [...]
The risk budgets this month are again unchanged. For the moderate risk investor, the allocation between risk assets and bonds remains at 40/60 versus the benchmark of 60/40. The changes in our indicators since last month's update have not been sufficient to warrant a change. Credit spreads did narrow significantly over the last month but the widening trend is still [...]
The risk budget this month is unchanged. For the moderate risk investor, the allocation between risk assets and bonds remains at a defensive 40/60 versus the benchmark of 60/40. However, we are watching credit spreads very carefully because the BofA ML US High Yield Master II OAS is approaching 7.5%. That is a level that we think should trigger a [...]
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