I’m pleased to share an update on recent market developments and the strategic positioning of Portfolio Shield™ for October 2026.
Over the past quarter, equities have made little net progress and have continued to trade in a sideways range. In my view, downside risks have begun to increase.
Higher energy prices and higher interest rates have historically been a headwind for stocks. Financial stocks and high-yield bonds have also weakened this month. Those areas have, at times in the past, deteriorated before broader equity prices.
Treasury bond prices declined sharply this month as interest rates moved higher. The prevailing Wall Street view has been that Treasury yields were too low and needed to rise because of inflation concerns and expectations of a firmer labor market.
Historically, periods of rising energy prices and slowing wage growth have often been followed by weaker consumer spending and a softer labor market. In August, retail sales rebounded and payrolls increased, which many market participants took as evidence the economy was resilient to higher energy prices.
Energy shocks can be short-lived, but households and businesses may now be treating this episode as lasting long enough to feed into consumer prices. That can help explain a brief pickup in demand, as buyers attempt to purchase before prices rise and businesses attempt to produce ahead of higher costs.
What some market participants viewed as confirmation of a stronger economy may instead have been demand pulled forward. Consumers also reduced their saving rate to support spending, a pattern that is difficult to sustain if energy costs remain elevated.
In addition, there has been persistent selling pressure on the intermediate-to-long end of the Treasury curve, often beginning in the premarket and extending into late morning. Some market observers have attributed this to an unwind of yen-funded carry trades or to fixed-income investors repatriating capital because of currency-hedging costs.
There is also a sizable short position in long-bond futures, including positioning associated with systematic strategies.
We have continued to hold the existing intermediate- and long-term Treasury positions despite the recent price decline because they were largely purchased when yields were above 5%, a level I consider attractive on a long-term basis.
If selling pressure eases and prices begin to recover, that short positioning could also be vulnerable to a short-covering rally. Similar episodes in the Treasury market have, in the past, seen sharp declines reverse once the selling abated. However, there is no assurance this will occur, and if interest rates continue to rise, the value of these positions could decline further.
Rather than attempt to time a reversal, I believe the more prudent course is to hold the current positions, given their yield and the strategy’s longer-term design.
For these reasons, the strategy will remain unchanged for October. 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
