I’m pleased to share an update on recent market developments and the strategic positioning of your Portfolio Shield™ for January 2026.
Following last month’s mild correction, equities rallied to new all-time highs before slightly pulling back in the final week of the year. Despite signs of a gradually slowing economy and a softening labor market, Federal Reserve rate cuts continue to support strong risk appetite, with investors aggressively buying dips on the belief that the Fed is injecting liquidity into the markets.
The market believes that the labor market will hold and inflation will cool which is the driving force behind risk assets. However, if the labor market continues to weaken, the odds of recession and a subsequent Bear market increase significantly.
Fixed-income markets were slightly weaker in November, with both high-yield and intermediate-term Treasures posting small declines. Momentum for intermediate-term Treasuries has turned negative, supporting its removal from the portfolio.
For January, your portfolio remains fully invested in the S&P 500 and Nasdaq-100, unchanged from last month. The bond allocation is now fully invested in high-yield bonds. A minimal cash position of 0.3% is maintained across all models.
Given the ongoing equity strength, Portfolio Shield™ will maintain its risk-on posture without hedging in the near term. Forward-looking indicators currently suggest the earliest hedging is likely in May 2026; however, we stand ready to act sooner if conditions warrant. For now, the robust performance of equities justifies full allocation.
Utilizing the latest Artificial Intelligence tools, I have been working diligently to build out the optimization engine to determine what is the optimal design for equity allocation, bond allocation, and hedging mechanism.
We tested different time windows for measuring volatility and momentum across the 2020-2025 period. Our optimization found that using a shorter volatility window with a longer return lookback provides better risk-adjusted returns. This allows the strategy to react more quickly to changing market conditions while still capturing meaningful trends.
We tested multiple approaches for when to include protective assets, from long-term Treasuries (as it is now), to gold, the dollar and even inverse-like funds, in the portfolio when it hedges. Our optimization found that the existing hedge was still the best choice but by adding gold when long-term bonds didn’t qualify, it provided better downside protection.
For the fixed income portion, we optimized how we choose between Intermediate-Term Treasury Bonds, high-yield bonds, or Short-Term Treasury Bills. We determined that a dynamic bond selection utilizing a dual momentum strategy adapts to interest rate and credit conditions better, generates higher returns and lower drawdowns.
I am looking forward to implementing these improvements in 2026.
As a reminder, all Portfolio Shield™ models are rebalanced on the first trading day of each month, and new funds received are invested according to your selected model at that time. If you wish to adjust your strategy or risk level, please contact us before the next rebalance. Accounts with a zero balance for six consecutive months may be closed, and the associated advisory agreement terminated.
We remain fully committed to your financial success. Please don’t hesitate to reach out with questions, to discuss your Portfolio Shield™ strategy, or to inform us of any changes in your financial situation or objectives so we can continue providing the most suitable guidance.
Thank you for your continued trust. We are dedicated to managing your Portfolio Shield™ with discipline and care as we work together toward your long-term financial goals.
