Lighten up a bit on stocks?

davfor

Portfolio stock % back up above start of year despite two prior trimmings of current stock portfolio holdings and YTD total portfolio gain at maximum again. Still mostly in TINA camp but Cash is King has appeal at current stock valuations. Looked at adding a little to energy but already overweight there and nothing compelling seen. Not interested in short term trading. Sept./early Oct. are often challenging for stocks so trimming now makes some sense to me. Any short term stock bulls out there?

Mark

What's TINA camp please?

I have been selling my less than stalwart equity positions but I am hanging on to my aristocrats. I'm not deploying any new cash at this time because of the challenges you alluded to. Most of what I'd like to add to seems wickedly overpriced.

davfor

The "there is no alternative" to stocks way of thinking.....cash is the most appealing alternative I currently see.

Sven

I like short term investment grade bonds, short term TIPs and GNMA as cash substitutes, although not perfect. My allocation is modest with 55% equity and tilting toward international. Trimmed back a bit on EM exposure. Last week Powell’s carefully crafted statement indicated tapering is coming.

davfor

My "cash account" currently includes RPHYX, ICSH, and FZFXX. I was at 67% equities at the start of the year but am currently up to 70% despite some previous YTD stock trimming. Thus, the thought of trimming stocks back again now to add a little more to the cash account. The economy appears to be continuing to improve. But the Delta variant, the possibility (probability?) this was the peak quarter for corporate earnings, the ongoing chips shortage, probable upcoming measured tapering by the Fed, uncertainty concerning future interest rate increases, the ongoing crackdown on corporations in China, and the "temporary" price surge are at minimum "wall of worry" problems to consider with a "richly" valued stock market.

Sven

This is a challenging environment to make modest gain when bonds are yielding little and US stocks are richly priced. Most of the gain I have came from last year rotation into value and smaller cap stocks. Hopefully earning reporting holds up. One bright spot is that Pfizer vaccine just received full FDA approval. This will increase the vaccination rate and brings people back to workplace. Fed is likely to taper later this year and start to raise rates in 2022 or 2023 when inflation is more than “transitory”.

racqueteer

My personal feeling is that the market has been supported artificially for a long time now. We haven't been getting a lot of breadth, and equities, barring certain sectors, has foundered. All kinds of health (and economic) concerns. Short-term? Yeah, I'm waiting for the other shoe to drop and have one eye on the exits.

Mona

racqueteer said:

My personal feeling is that the market has been supported artificially for a long time now. We haven't been getting a lot of breadth, and equities, barring certain sectors, has foundered. All kinds of health (and economic) concerns. Short-term? Yeah, I'm waiting for the other shoe to drop and have one eye on the exits.

Raq,

It is nice to see your post on MFO.

Thank you.

Mona

Sven

Today the Fed (and other central banks across the globe) is part of the market. To support the stock market, quantitive easing, QE was introduced back in 2008. During the COVID-19 pandemic and the country is being locked down. The broader market fell over 30% within 2 weeks. As part of the rescue plan, the Fed cut the interest rate to near zero. In addition, they bought $80B treasury and $40B mortgage backed bonds on a monthly basis. The market responded quickly and marching upward toward recovery. By fall 2020, the recession is over.

Below is a short piece from Brookings Institute on tapering of Fed's bond buying.
https://brookings.edu/blog/up-front/2021/07/15/what-does-the-federal-reserve-mean-when-it-talks-about-tapering/

AZRph

Generally, I have been incrementally lowering the allocation and beta of my domestic portfolio and the opposite on the international side with an EM orientation. Playing sectors a bit more aggressively with rare earth/metals and semis (doing well) and EM Internet/E-Commerce (not so much). On the fixed income side 2:1 ratio low duration bonds to cash.

Do agree with several posters that market breadth during this advance seems muted and that caution is warranted.

hank

Rather than lighten up on an already slim equity exposure, I bought a little DOG today. It’s 1% of total holdings and I do not intend to add to it. Not sure if this is going to work. But I think we’re over-due for a correction. Certainly don’t view it as a long term hold.

The SEC under Gensler is seeking public comment on the “gamification” of investing - ie: the online brokerages that promote frequent trading and the self-made investment online “gurus” who pocket millions a year advising the obedient herd who follow their recommendations - sometimes en masse. There are any number of articles in the financial press re Gensler’s mission. Kindly share your letters to Mr. Gensler with this board before sending them off.

davfor

Sven said:

Today the Fed (and other central banks across the globe) is part of the market.

This is a conclusion I adopted in February 2019 ( Powell Put ). It became clear to me at that point the Fed had given up on reviving traditional interest rates. The Fed and the stock market are for now co-dependent and planning to live in a somewhat lower interest rate world. The pandemic and the Fed's more inclusive employment mandate have further solidified this change. My portfolio allocation to bonds was 37% on 1/4/19. It is 25% today. That 12% difference has been allocated to higher yield stocks (3%+ YOC). (Time will report to me on the ongoing benefit of that change.)

Sven

That is my exact thinking going back when Benanke started QE, and the central banks around the globe. Still can't imagine the negative interest rates in Europe and Japan.

Baseball_Fan

And now you've got an even bigger clown in the white house who should be taking it easy let alone in the white house along with his socialist MMT meaning magic money tree thinking cabal putting us further and further into debt oblivion....good times, freebies for all, dingbats, criminals, billionaires and everyone in between

Making investment experts out of us all

What could go wrong? Hold my beer....

Baseball Fan

Crash

racqueteer said:

My personal feeling is that the market has been supported artificially for a long time now. We haven't been getting a lot of breadth, and equities, barring certain sectors, has foundered. All kinds of health (and economic) concerns. Short-term? Yeah, I'm waiting for the other shoe to drop and have one eye on the exits.

Agreed..... But where to? For traditional safety, there's bonds. I'm at 43% equities now, where it feels comfortable. I'm thinking to take year-end profit and stow it in my bonds. I'm not chasing any calendars or seasons anymore. I'm just where I want to be. If the bottom falls out in a hurry, I will surely want to react in a hurry... I've got a sweep account where I can stow cash, but bonds seem at least a bit more productive than cash.

davidrmoran

what bonds, or types, or bundles / ETFs / mfunds ?

Crash

I leave it to the fund managers. I do not like to deliberately throw money at short-term funds. RPSIX is simply a default fund, because it's spread-out, with a touch of equities in the mix. PRSNX is dollar-hedged. I'm still quite satisfied with PTIAX, too.

davfor

Out of curiosity, just checked which OEF holdings contribute significantly to my bond allocation (other than RPHYX which I use as a cash substitute -- NTF at Fido so easy to sell and buy). FWIW, in high to low order:

SVARX, RCTIX, CRAAX, PTIAX, PONAX, VWINX, BGHIX, FIRNX.

SVARX was added to my portfolio about a year ago. It appears well suited to the current market environment and would probably be the bond fund I would be most interested in adding to at this point (but would need to consider it is TF at Fido).

carew388

RCTIX seems to be TF at all 5 brokerages I checked, for brevity sake: F V S TDA and E-Trade. TDA wins the Awful Award for combining a tf with a $100,000 minimum !

bee

The King of Buy & Hold

John Templeton once said, "History shows that time, not timing, is the key to investment success. Therefore, the best time to buy stocks is when you have money"

...few people invest in such a way as to give themselves the best chance of multiplying their capital because they're always, as the cliche runs, pulling up the plant to look at the roots.

Nick-Train-The-King-of-Buy-and-Hold

hank

@bee

Templeton is one of my all time favorites. I owned his flagship TEMWX almost from its inception and during the time he managed it. That said, Sir John had a very long-term focus. That’s fine for those who can ride out even the fiercest of market downturns with the confidence and equanimity he exuded. For example, TEMWX fell nearly 40% in 2008. For those whose demeanor and station in life allow them to accept with Templeton-like calm that kind of one year draw-down I say “hats-off”.

However, there’s a larger point to be made here. Sir John would not recognize the investment climate today. His formative era was one in which institutions and wealthy estates ruled the equity markets. To his credit, Sir John planted the seeds that led to individual investors taking a significant role and reaping the rewards. In Sir John’s day you read the WSJ (in print format) to find out how markets performed on the previous day. You phoned-in “buys” and “sells” to your broker during the trading day. Mutual funds were in their infancy. “ Commission-free ” trades did not exist. Nor did ETFs. There was no internet. No cell phones. No Bloomberg or CNBC. No Fidelity (as we know it today). No Schwab, Robinhood or E-Trade. Sir John would not understand SPACS, Kathy Wood’s ARK or day-trading. And he’d have scoffed at the idea of individuals buying stocks “on margin”.

To my broader point - these and other changes have altered the investment landscape in ways Templeton wouldn’t recognize, ways which we are still trying to understand, and with repercussions which I fear will prove to be to our eventual detriment.


“A foolish consistency is the hobgoblin of little minds …“ - Ralph Waldo Emerson

carew388

+1 hank

bee

@hank...you're right. We grow our plants (investment) hydroponically today...roots exposed...with lots of miracle grow!

davfor

davfor said:

Sven said:

Today the Fed (and other central banks across the globe) is part of the market.

The Fed and the stock market are for now co-dependent and planning to live in a somewhat lower interest rate world. The pandemic and the Fed's more inclusive employment mandate have further solidified this change.

Here is an article that unpacks some of the challenges embedded in my previous comment.

At stake is just how hot officials are willing to let the labor market run before they start to shut off support of cheap money.

Act too soon and the minority and less educated workers Powell now includes in the policy calculus could miss out on jobs and wage gains. Act too late and inflation could accelerate....

Fed’s Next Big Policy Debate: How to Define Maximum Employment