The banking crisis in Cyprus dominated the news this week as the market sold off 3 days in a row after being up 10 days in a row. The selloff was blamed on what was going on in Cyprus but that was not the real story. Globally Cyprus is pretty insignificant, most people probably don't even know where it is. The real story is that markets just don't go up for 10 straight days without needing a breather from time to time, Cyprus was just an excuse to take some profits. We told a reporter last week that we expected the Fed meeting to be an excuse to take profits, Cyprus just beat Bernanke to the punch.
Equity Markets
Our momentum indicators are still extremely bullish on the stock market. Our positive reading on stocks does not mean that the market is guaranteed to rise from here. There are still many risks on the horizon (Poor corporate earnings, problems in Europe, slowing economy, partisan bickering in Washington, etc) that could cause a selloff. However, our research suggests that when our momentum indicators are bullish the rewards of being invested outweigh the risks.
In the US we are now heavily weighted towards small cap stocks as they are showing the strongest momentum.. Globally, we have sold our international developed stocks and shifted to US Stocks. The three day selloff has brought the market closer to equilibrium. We have been buying Small Cap Stocks and US Dividend Paying stocks into the recent weakness.
Equity Matrix
|
Time Frame |
Market Condition |
TTM Positioning |
|
Short Term |
Slightly Overbought |
50% Cash 50% Small Cap & US Dividend Stocks |
|
Intermediate Term |
Uptrend |
Fully Invested- S&P 500 & Small Cap |
Fixed Income Markets
Our momentum indicators show all areas of the bond market are weakening. High yield bonds are still the only area we see with any momentum as they can tend to trade more like stocks than bonds at times.
We continue to hold our counter trend position in long term Treasuries. We understand that over the intermediate and long term Treasuries are probably the worst bet you can make, but over the short term they are looking oversold and have provided protection during selloffs.
Fixed Income Matrix
|
Time Frame |
Market Condition |
TTM Positioning |
|
Short Term |
Oversold |
100% Invested in Treasury Bonds |
|
Intermediate Term |
Most markets in a downtrend |
1/4 Invested in High Yield Bonds |
Top Holdings
1. Cash
2. Small Cap Stocks
3. S&P 500
4. Dividend Paying Stocks
401k Advice
Below is our recommended allocation for 401k plans held outside of TWM:
|
Risk Tolerance* |
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|
Asset Type |
Asset Class |
Conservative |
Moderate |
Aggressive |
|
Stock |
S&P 500 |
20% |
33.3% |
|
|
Stock |
Mid Cap Stock** |
20% |
33.3% |
|
|
Stock |
Small Cap Stock** |
20% |
33.3% |
|
|
Fixed Income |
High Yield Bond*** |
33% |
13% |
|
|
Cash |
Cash |
67% |
27% |
|
|
100% |
100% |
100% |
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|
* This should be based on the amount of risk/return you are looking for on this |
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|
block of money. |
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**If you do not have Mid Cap and/or Small Cap funds available that part of the |
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allocation can go into the S&P 500. |
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|
***If you do not have multiple bond funds then fixed income allocation can go into an |
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investment grade bond fund and/or multi-sector bond fund. |
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Tuttle Tactical Management, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. You should not assume that any discussion or information contained in this letter serves as the receipt of, or as a substitute for, personalized investment advice from Tuttle Tactical Management, LLC. It is published solely for informational purposes and is not to be construed as a solicitation nor does it constitute advice, investment or otherwise. To the extent that a reader has questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional adviser of his/her choosing. A copy of our written disclosure statement regarding our advisory services and fees is available upon request. Our comments are an expression of opinion. While we believe our statements to be true, they always depend on the reliability of our own credible sources. Past performance is no guarantee of future returns.
Certified Financial Planner® Board of Standards, Inc. owns the certification marks CFP®, Certified Financial Planner® and federally registered CFP® in the U.S., which it awards to individuals who successfully complete the CFP® Board's initial and ongoing certification requirements.
© Tuttle Tactical Management
