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Portfolio Shield – February 2025

I want to update you on recent market developments and the adjustments to your Portfolio Shield™ strategy for February.

As we entered the new year, stocks rallied to new all-time highs, driven largely by optimistic investor sentiment and aggressive buying during market dips. This enthusiasm is fueled by expectations of continued growth under President Trump’s pro-growth agenda. Additionally, corporate share buybacks have resumed, emerging from their blackout period, with corporations anticipated to execute over one trillion dollars in buybacks in 2025, further supporting stock prices.

Looking ahead, we expect to keep the equity allocation unhedged for the foreseeable future. There are early indications that the decline in bond prices, which began in September 2024, may have concluded. Momentum is now positive for both high-yield bonds and intermediate-term Treasuries.

Given this shift, our strategy will adopt a bond-bullish allocation for February. The equity allocation remains unchanged as we continue to position ourselves to benefit from ongoing stock market rallies.

We are actively exploring the options discussed in last month’s update to refine the equity allocation and transition Portfolio Shield™ to a more dynamic monthly rotational momentum strategy. Our back-testing engine is now complete, allowing us to test various strategies to identify the most effective approaches based on historical performance. Our aim is to develop a fully rotational model that enables agile market positioning.

Significant improvements have been made to the momentum model for bond allocation. We anticipate these enhancements will lead to better decision-making, optimizing allocations during rising bond prices and swiftly adjusting to defensive positions when prices fall.

For February, all models—Growth, Balanced, Income, and Conservative—have exited short-term bonds (SHY) and transitioned to high-yield bonds and intermediate-term Treasuries, capitalizing on the positive momentum in HYG and IEF observed last month.

Please note that all strategies will be rebalanced on the first trading day of each month. Any new funds will be invested according to your selected model at that time. If you wish to change your investment strategy, changes will be implemented at the next rebalance. Accounts with a zero balance for six months or more will be closed, and, where applicable, advisory agreements terminated.

Currently, we maintain a minimal cash allocation of just 0.3% across all models.

If you have any questions or would like to discuss your Portfolio Shield™ strategy further, please feel free to reach out.

Thank you for your continued trust in us to manage your investments with Portfolio Shield™.

Best regards,

Steven Van Metre