Game Plan

The  game plan is tactical and strategic allocation of our clients assets based on what the playbook tells us has historically occurred. It is further refined to the specific risk/reward parameters of our various client groups. In some situations,  portions of the game plan will be implemented across the board in all client accounts or in a specific investment category. At other times portions of the game plan can be specifically implemented in individual client accounts where events or certain client events may warrant such action.

We said the other day that the playbook suggests that the higher probability for the market over an intermediate period is likely to be a trend less consolidation period.  Recent trading action is suggestive of a market locked into a likely intermediate range between 1,730 and 1,845 on the S&P 500.  While anything can happen, historical probability would suggest that those recent highs should pose resistance to the market's advance at least the first time stocks again approach those levels.  

At the beginning of the year we reviewed all of our portfolio strategies and individual client mandates.  Within those strategies and mandates  certain ETFs we held needed to be rebalanced.  We began that rebalancing process in early 2014 and had not put those new cash levels back to work before the market began its most recent sell off.  We have redeployed some of that cash in the most recent decline. We plan, given what we know today, to become a bit more defensive as we approach those previous highs.  We have not finished our redeployment process and believe that we will be rewarded for patiently implementing these changes over the course of the next several months.  

One of the reasons we have taken our time is that there are certain tax implications to many of our clients if we would have raised more cash immediately this year.  Many investors will look at their portfolio returns at the end of the year and measure the gain without understanding their individual tax consequences.  What you make in the market is important but so is what you can keep away from Uncle Sam's clutches.  As such we try to be as tax neutral as possible. 

We are going to use what we believe as this consolidation phase as an opportunity to make some portfolio changes that were not available to us in a strong year like 2013.  Even if we become somewhat more defensive to the upside the closer we trade near resistance, we think we will have reasonable equity levels if we are wrong and the market resumes its advances higher.  We also have the defensive pages of the playbook nearby if events warrant a more defensive market posture.  

We very rarely discuss specific securities or asset changes we might have made on this blog. I will say however that in general we are increasingly becoming more attracted to foreign based ETFs, especially as these relate to emerging markets.   Beyond that general investment observation {an observation  we've now held for over a year which has also been very wrong}, please feel free to contact me personally if you would like more information on how we are investing in this environment.  

*Long ETFs related to the S&P 500, foreign based ETFs and emerging market ETFs in client and personal accounts at the time of this publication.  Please note that these disclosures can change at any time and we under no obligation to inform the readers of this blog if these positions should change.