I’m pleased to share an update on recent market developments and the strategic positioning of Portfolio Shield™ for July 2026.
Over the past month, stocks declined from their early June highs. The 10% position in IGV did not play out as anticipated and has been removed from the model for July.
While I remain optimistic that stocks could still reach new all-time highs in the longer term, three key factors point to a short-term pullback:
New Fed Chair Kevin Warsh struck a notably hawkish tone in his first press conference, leading markets to price in a potential rate hike at the July FOMC meeting. Given the inverse relationship between the Federal Funds Rate and tech stocks, this has prompted quiet selling in long equity positions.
Hedge funds have been unwinding long equity exposures ahead of earnings season. While higher CAPEX spending was previously rewarded, the market now views escalating AI-related expenditures—particularly without sufficient free cash flow—as a negative. This raises the prospect of companies issuing shares to raise capital, a dynamic often seen near market peaks.
Systematic trend-following strategies are nearing triggers for short-term sell signals, which could introduce significant supply into the market.
These dynamics support what I believe will be a short-term correction. For July, we are hedging the equity allocation with long-term bonds. Long bond prices have already begun to rally—a typical response when short-term rates rise on Fed hawkishness while longer-term yields fall amid softening growth and inflation expectations.
The path to new all-time highs would likely require future rate cuts and moderated CAPEX. Intermediate- and long-term Treasury yields continued moving lower last month, reinforcing the strength of our June shift into intermediate-term Treasuries. I expect this trend to persist as the economy slows and markets price in potential policy challenges from the Fed.
For these reasons, we are removing the 10% IGV position from the equity allocation, reducing exposure to the S&P 500 and Nasdaq-100, and adding a long-term bond hedge. Portfolio Shield™ is now positioned defensively in a risk-off environment. There are no changes to the bond allocation, as I anticipate continued strength in intermediate-term Treasuries. I will monitor conditions closely and adjust as needed. A minimal cash position of approximately 0.3% will be maintained across all models.
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
