The Alhambra Portfolio is a tactically-adjusted version of our original strategy, The Fortress Portfolio. The development of the Alhambra Portfolio is detailed in Delivering Value. The Alhambra Portfolio starts with the Fortress strategic allocation and then makes tactical changes based on current conditions.
Asset allocation adjustments are determined by:
- Yield Curve – the difference between long and short-term rates is the most accurate predictor of recession and recovery
- Credit Spreads – the difference between junk bonds and Treasuries is another good indicator for recession
- Valuation – valuation provides a good estimate of future returns and therefore risk
- Momentum – momentum exists in markets because humans trade on emotion
- US Dollar – the movement of the dollar can have a dramatic impact on various asset classes
The Alhambra Portfolios are the culmination of years of research. They are a combination of a proper strategic plan – the Fortress Portfolio – and intelligent tactics applied to construct a superior portfolio.