I’m pleased to share an update on recent market developments and the strategic positioning of Portfolio Shield™ for August 2026.
Over the past month, momentum in equities has slowed, with the technology-heavy Nasdaq-100 entering the early stages of a correction. Growing concerns about rising Capex spending on AI without a clear return on investment in sight are weighing on Wall Street. While it remains possible for the stock market to make new all-time highs, my view is that this is unlikely until stocks complete a correction. For this reason, I decided to hedge the equity allocation with a position in long-term Treasuries.
Alongside the Nasdaq-100, bond prices fell and interest rates rose following the recent FOMC meeting. Wall Street interpreted Fed Chair Warsh’s decision to leave the policy rate unchanged, along with limited forward guidance, as a sign that the Fed may be falling behind on inflation. Although there are few signs inflation is currently rising—consumer and business demand are declining at a rather quick pace—market participants believe the Fed will eventually respond with a series of aggressive rate hikes.
In an attempt to front-run the Fed, 30-year Treasury yields have risen to their highest level since 2007. However, over the past three years, when Treasury yields have approached these levels, they have soon reversed and declined. The driver has had little to do with the Fed or inflation and everything to do with the supply and demand for credit. As interest rates rise, consumers and businesses have made clear they are not interested in borrowing at higher yields, which is evident in the decline in demand across interest-rate-sensitive sectors and for new loans.
This is why, over the past three years, the large commercial banks have been buying Treasuries—first to offset the decline in lending demand and second to help bring rates back down to levels where lending demand can increase. These yield levels have consistently represented clear buying opportunities. Given Wall Street’s current eagerness to short the bond market, we are not adding to the long-term Treasury position this month.
It is important to understand that while the strategy rebalances monthly, it is not chasing month-to-month returns. Decisions are based on the expectation that a position will be held for three months or longer. In this case, both history and the matching decline in lending demand suggest that over the next several months rates are likely to decline and bond prices rise.
At the same time, my expectation is that stocks may experience a short-term rally, but the trend clearly indicates that the downside risk to equities currently outweighs the upside potential.
For these reasons, the strategy will remain unchanged for August. 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
