I’m thrilled to share an update on recent market developments and the refined adjustments we’ve made to your Portfolio Shield™ strategy for August. Last month, the strategy excelled, driven by strong rallies in equities and high-yield bonds. Intermediate-term bonds remained flat, neither enhancing nor detracting from overall performance.
Despite a gradually slowing economy, several factors bolster a positive outlook for equities. Earnings expectations for this quarter are set at achievable levels, the trade war is coming to and end, and Trump’s tax bill has been enacted, all supporting market optimism. While investors anticipate a Federal Reserve rate cut, it is unlikely before year-end unless labor market conditions weaken significantly. The Fed’s current focus on inflation suggests that only a softening labor market would prompt earlier cuts, which could pose challenges for stocks.
High-yield bonds delivered exceptional returns last month, significantly boosting the bond allocation. However, intermediate-term bonds showed no momentum and contributed little to performance. With negative momentum signals for intermediate-term Treasuries, we have removed them from the bond allocation for August.
For August, your portfolio reflects these updates: the equity allocation remains fully invested in the S&P 500 and Nasdaq-100, consistent with last month, while the bond allocation is now entirely dedicated to high-yield bonds, with intermediate-term Treasuries eliminated. A minimal cash allocation of 0.3% is maintained across all models.
Given current market conditions, we anticipate the strategy will maintain its risk-on stance without hedging in the near term. Should market dynamics shift, we are prepared to adapt, but as long as equities perform strongly, the strategy will remain fully allocated.
In previous updates, I mentioned engaging a programmer to develop a custom rotational strategy. While those efforts did not meet expectations, I’m excited to share a promising development. Advances in artificial intelligence have enabled me to create sophisticated programs without extensive coding expertise. I’ve begun building a swing trading program that integrates diverse strategies, supported by a custom backtesting platform. The early results are highly encouraging.
By leveraging AI, I’m working toward adapting the Portfolio Shield™ algorithms to optimize the strategy through real-world backtesting simulations. While this process is ongoing, the technology now available positions us to achieve these enhancements efficiently. I’m eager to share further progress on this initiative and its potential to refine your investment strategy.
Please note that all strategies are rebalanced on the first trading day of each month, with new funds invested according to your selected model at that time. To adjust your investment strategy, please notify us before the next rebalance. Accounts with a zero balance for six months or longer may be closed, and any applicable advisory agreements terminated.
We remain dedicated to your financial success. If you have questions or wish to discuss your Portfolio Shield™ strategy further, please don’t hesitate to reach out. Additionally, please inform us of any changes to your financial circumstances so we can tailor our recommendations to your needs. Accurate and complete information ensures we provide the most effective investment guidance.
Thank you for entrusting us with your investments. We are committed to managing your Portfolio Shield™ with precision and care to help you achieve your financial aspirations.
Best regards,
Steven Van Metre
