Tactical Asset Allocation—Winter 2019/20
There really is nothing that can take the place of proper asset allocation when it comes to growing and protecting your wealth throughout the economic cycle. What happens when you ignore your own risk level and your proper asset allocation portfolio? Consider the Americans who lost over 50% of their investment portfolio value between 2000 and 2002 because we were in a "new economy" and "old rules no longer apply."
No. Refuse to be one of the victims of a shock to the system by taking these three simple steps:
No. Refuse to be one of the victims of a shock to the system by taking these three simple steps:
- Identify your Risk Number
- Assure your portfolio is aligned with the appropriate portfolio below based on your unique Risk Number
- Use a combination of the 100 investments in the five Penn Strategies to fill in where you are underweighted
Members, select the appropriate image below to read our quarterly commentary and to view recommended asset allocations for the first quarter of 2020...
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Winter 2019/20 Commentary...
Based on current events, we have upgraded our view of both US and international equities for the first quarter of 2019. With a Phase 1 trade deal done, the UK clearly on a path toward a break from the EU on 31 Jan 2020, and more mainstream candidates replacing anti-business candidates on the Democratic ticket for the nomination, our major concerns for the year have been muted. They are not gone, to be sure, but we are as bullish on 2020 as we have been at any other point.
Domestically, the Fed has strongly implied it will hold off on taking any action over the coming year, barring unforeseen incidents. In other words, low rates are here to stay for quite awhile. The biggest threat to that stance would be a stirring up of inflation, which might cause the Fed to raise rates, but we expect inflation to remain tame. This sets up an interesting year for the fixed income portion of investors' portfolios. When rates were high, a decent yield was present. As rates fell, the principal value of bond holdings generally rose. Now that rates have bottomed, neither of those two conditions exist, meaning investors will look elsewhere for yield. This condition should bode well for higher-yielding equities, such as utilities, REITs, and financials.
Internationally, we are overweighting the UK as they begin the process of leaving the constraints of the EU. President Trump has already explicitly expressed the desire to hammer out a strong trade deal with his buddy, Prime Minister Boris Johnson. With the Tories firmly in control of Parliament following Labour's drubbing in the elections, pushing through a deal should be relatively easy. We are also overweighting India and Southeast Asia, the region just east of India—an emerging market zone. We continue to underweight developed Europe, with the exception of the UK.
The first quarter of the year is typically a strong one for the markets, and we see that playing out in 2020. The rougher May through mid-October may be a different story, based extensively on what plays out in the primaries and leading up to the election. The last part of the year, post-election, is currently the wild card. We anticipate building our cash position leading into the second quarter of the year.
Domestically, the Fed has strongly implied it will hold off on taking any action over the coming year, barring unforeseen incidents. In other words, low rates are here to stay for quite awhile. The biggest threat to that stance would be a stirring up of inflation, which might cause the Fed to raise rates, but we expect inflation to remain tame. This sets up an interesting year for the fixed income portion of investors' portfolios. When rates were high, a decent yield was present. As rates fell, the principal value of bond holdings generally rose. Now that rates have bottomed, neither of those two conditions exist, meaning investors will look elsewhere for yield. This condition should bode well for higher-yielding equities, such as utilities, REITs, and financials.
Internationally, we are overweighting the UK as they begin the process of leaving the constraints of the EU. President Trump has already explicitly expressed the desire to hammer out a strong trade deal with his buddy, Prime Minister Boris Johnson. With the Tories firmly in control of Parliament following Labour's drubbing in the elections, pushing through a deal should be relatively easy. We are also overweighting India and Southeast Asia, the region just east of India—an emerging market zone. We continue to underweight developed Europe, with the exception of the UK.
The first quarter of the year is typically a strong one for the markets, and we see that playing out in 2020. The rougher May through mid-October may be a different story, based extensively on what plays out in the primaries and leading up to the election. The last part of the year, post-election, is currently the wild card. We anticipate building our cash position leading into the second quarter of the year.
Aggressive Growth Portfolio: If your Risk Level is above 90
Conservative Growth Portfolio: If your Risk Level is 51-89
Growth & Income Portfolio: If your Risk Level is 28-50
Asset Preservation Portfolio: If your Risk Level is 27 or below
