hmm. isn't that consistent with the behavior of someone like hussman here, who is apparently still fully invested but also fully hedged?
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The Market Climate for stocks remains characterized by unusually unfavorable valuations and unfavorable market action. The Strategic Growth Fund remains fully invested in a broadly diversified portfolio of stocks, with an offsetting hedge intended to remove the impact of overall market fluctuations from that portfolio.
After the deeply oversold status that the market achieved a few weeks ago, we've seen the standard “fast, furious, and prone to failure” rally to clear that. It's important to emphasize how dangerous it is to attempt “playing” these rallies. In a negative Climate like this, stocks can remain deeply oversold for some time, so oversold conditions in and of themselves make poor buy points. Similarly, the subsequent rallies tend to end without notice, and often without hitting “standard” resistance points such as moving averages, Bollinger bands, or prior resistance levels. It's possible, when interest rates are falling, to construct certain favorable “sub-Climates” within what would commonly be viewed as bear markets. But in decades of research, I've still not found a reliable means to capture brief “bear market rallies” that don't include falling yields as a requirement. We don't have that here, so all rallies in this Climate should be viewed as suspect.
In bonds, the recent rally in straight bonds provides a reasonable opportunity to reduce portfolio duration. In the Strategic Total Return Fund, our present duration of about 3.5 years is solidly in Treasury Inflation Protected Securities, which I continue to view as useful investments here. The Market Climate for precious metals also remains favorable, while the U.S. dollar continues to appear vulnerable. The markets continued to re-evaluate the risks of inflation last week (correctly, in my view), so we've seen a nice recovery in many inflation-linked assets. Overall, the Strategic Total Return Fund remains positioned primarily to benefit from downward pressure on real interest rates and the U.S. dollar, but our overall exposure to risk is relatively conservative in all of the asset classes we hold – TIPS, precious metals, utilities, U.S. agency notes, and foreign government securities.
AI
