I’m pleased to share an update on recent market developments and the strategic positioning of Portfolio Shield™ for May 2026.
Timing is everything. On April 1st, I made the decision to switch both the equity and bond allocations to a risk-on position, as the data supported a near-term reversal in the stock market. The timing was excellent — stocks quickly rallied to new all-time highs and high-yield bonds rose in tandem.
This move was driven by a key shift in systematic machine positioning. Entering the end of March, these strategies were heavily short the market. As stocks began to reverse trend, the machines aggressively covered shorts, while many professional investors, money managers, and hedge funds remained bearish and missed the turn.
Supporting evidence also emerged in the volatility and U.S. dollar markets, both of which began to decline. Lower volatility and a weakening dollar are typically bullish for equities.
While recession risks remain elevated—four of the last five major energy shocks have historically led to recessions and bear markets—my short-term outlook for stocks remains bullish. This view is supported by the resumption of corporate share buybacks, strong inflows into equities, continued buying by systematic strategies, and broader momentum-driven buying.
For that reason, there will be no changes to the equity or bond allocations for the month of May. I will, however, continue to monitor conditions closely and stand ready to adjust as needed. A minimal cash position of approximately 0.3% will be maintained across all models.
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.
We have started implementing these improvements.
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.
Steven Van Metre
