Our Technical Macro investment style box update shows where the various asset classes stand in the market relative to each other. This clearly remains an equity-dominant market with the market’s core block of assets ranking at the 90th percentile versus all other asset choices. Technically, there is no interpretation lending to a bearish conclusion here or for holding cash or inverse products. Investing against a bull market can be disastrous, and not working along with a bull market can be very unprofitable as well.
Satellite groups like Real Estate, Mid Cap and Small Cap continue to be leading themes this half of the summer, and Emerging Markets have reached and held a spot in the top quarter of the various macro asset classes as well. Moving forward the landscape remains bullish, so your allocation should reflect that. Turbulence comes and goes, but relative dominance is the right data to follow long term.
The S&P 500 related funds continue to show leadership. The next best remains Small Value and Mid Growth – a strange combination. Overall, it is the Growth component that is showing a rising positive direction at this point. Small Growth and Micro Cap have slipped the most this year, but have recently become less negative despite still showing up in the bottom of the list. You need to monitor these groups for a potential rebound back up in score. You may remember that at the beginning of the year these two were the leaders. Exhales through the year has brought us to the point where you must properly make the call on what direction these high beta groups are heading.
The US Money Market group remains the least strong piece to this lineup, suggesting there should be no forethought to go to cash, but rather stick with the relatively strong equity pieces that you are comfortable with. November is the next seasonal break point in the calendar. At that time you can realign your 401k portfolios. Between then and now, you can also look for market corrections that will enable you to add to your positions at a discounted price.
Always consult an investment professional before making investment decisions. Nothing in this post is to be construed as investment advice. All investments have a risk of losing value.