I’m pleased to share an update on recent market developments and the strategic positioning of Portfolio Shield™ for June 2026.
Over the past month, stocks continued their strong rally, validating the excellent timing of our April 1st decision to switch both the equity and bond allocations to a risk-on position. This move has positioned us well to participate in the ongoing upward momentum in equities.
I remain optimistic that stocks are likely to extend their rally in the coming months. A key supportive factor would be a moderation in crude oil prices, which have been elevated due to geopolitical tensions but show signs of potential easing as supply dynamics stabilize. Lower oil prices would help alleviate inflationary pressures and support broader economic growth. Similarly, declining interest rates would further fuel risk appetite across markets.
Treasury yields moved higher last month amid persistent short positioning by systematic strategies, which have now reached near-maximum short levels. This creates a compelling setup for a potential sharp reversal: as bond prices begin to recover, these machines are likely to cover their shorts aggressively, amplifying upward momentum in Treasuries. We saw a similar technical environment back in March 2023, when comparable yield levels were followed by a strong rally in Treasury bonds.
While high-yield bonds typically rise alongside equities in a risk-on environment, they have remained relatively unchanged over the past month. In contrast, intermediate-term Treasuries now stand out with significantly greater upside potential given the crowded short positioning and the prospect of short-covering flows.
We are also seeing an attractive tactical opportunity in IGV (iShares Expanded Tech-Software Sector ETF). The fund has a notably large short interest, which has reached elevated levels. This crowded short positioning sets up the potential for a sharp short-covering rally if momentum continues in the software sector.
For these reasons, we are initiating a 10% position in IGV within the equity allocation for June, keeping Portfolio Shield™ fully engaged in the favorable risk-on environment. We are also switching the bond allocation to intermediate-term Treasuries to best capitalize on the attractive technical setup and potential for a meaningful rally in bond prices. I will 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
