Market Concerns - are you hedging your portfolio, or is it business as usual?

JD_co

https://www.fxstreet.com/analysis/us-market-close-alert-the-markets-broken-record-keeps-spinning-202502272230

There are always headwinds for the markets. The US has some looming issues on the short-term horizon, as noted in the attached article.

-Declining consumer sentiment
-Tariffs -rubber hits the road March 4th (Canada & Mexico, +China), with steel and aluminum duties March 12th.
-US regime shift
-Inflation remains sticky
-Possibility of stagflation (high inflation + high unemployment)

"How much fiscal, tax-cut, and pro-business dry powder does the U.S. administration actually have to fire off?"

hank

Good topic. I don’t invest according to the factors listed in the OP (not that it’s a bad idea). But like Yogi Berra said - “It's tough to make predictions, especially about the future.” To a great extent it’s “business as usual” here.

I have trouble in my head separating “hedging” from just plain building cash for anticipated withdrawals. But have been slowly raising cash from 10% (all of last year) to 12.5%. Have a small sell order in for some shares of GLFOX Monday to seal that.

Only 34% in equities now with better than half of that in foreign holdings. For real more conventional hedging I use CPLSX (large sum) and CPZ (very small sum). I can tell by the way they behave most days that management has some shorts on - especially in the QQQ.

Discrepancy in above totals is owing largely to holdings like real estate, preferred stocks, precious metals, energy etc. which are considered neither cash nor equity. For the 12.5% loosely defined cash position I’m splitting the money 3-ways among SPAXX, JAA and VNLA

JD_co

Thanks, Hank. I think of raising cash as a form of hedging.

hank

JD_co said:

Thanks, Hank. I think of raising cash as a form of hedging.

Absolutely. If there were a big sell-of of equities, that extra cash would be put to work - but probably not all at once. In late ‘08- early ‘09 there was no cash reserve. It was a great opportunity to put cash to work.

PS - I’m uncertain of how big a distribution might be coming out later in the year with a potential home infrastructure upgrade still on the drawing board. Quite likely I’ll revert back to the 10% cash figure after everything settles out.

FD1000

Generally a good topic but has low correlation to what markets do in the next 1-4-16 weeks. A trader like me is interested only in what to do now and disregards politics and economic indicators.
There are concerns all the time. My idea is to be invested most times at 99+% (like Now), and be out only when I see very high risk.

Crash

Just due to age, I'm decreasing equities some, and the bonds are a tad bigger than my equities now. Growing cash in MM, but that's for an earmarked expenditure later in the year.

Markets over and over show themselves to be amoral and apolitical. As long as there's money to be made, Mr. Capitalism is busy with business as usual. In the GFC, I was buying EM bonds through it all. Actually did well, by accident. Portfolio looks much different these days. Wondering what might happen in Panama. BLX has HQ there. But the thing operates in cooperation with a big bunch of national Treasuries in LatAm and Caribbean. Jumped up on Fri. after reporting numbers for 4Q '24. Watch Mr. Market claw it back on Monday. Eh?

davfor

I suspect the markets may well unfold in some unusual ways in 2025. But, my crystal ball continues to lack sufficient predictive power for me to try to time the markets, even when considering the punch list of items noted at the start of this thread. Had about 73% invested in "stocks" (per Fido) as of early January and am not anticipating any portfolio changes for 2025. Continue to maintain sector over weights in REITS, Financials, Energy, and Utilities. Monthly dividend income is maintained in a MM account as it is received for potential end of year release of ~4.5% of my beginning of year investment portfolio balance -- subject to 2025 not producing a serious and lasting market meltdown.

Observant1

There is currently a lot of uncertainty in the markets.
I surely don't know what will transpire in the near-term.
I may increase my bond/cash holdings slightly since I'm approaching retirement.
Otherwise, it's business as usual...

Sven

Mag 7 stocks are behaving differently these days. Tesla stock is trailing badly from its peak. Sale in China grew only 1% while the local Chinese brands are growing in double digits.

Otherwise, we are increasing cash position via our treasury ladder and USFR, just in case. Our retirement is in sight, now we are a cash bucket to cover several years of living expenses. The rest are invested conservatively in case of severe drawdown and/or recession this year.

hank

FD1000 said:

Generally a good topic but has low correlation to what markets do in the next 1-4-16 weeks. A trader like me is interested only in what to do now and disregards politics and economic indicators.
There are concerns all the time. My idea is to be invested most times at 99+% (like Now), and be out only when I see very high risk.

Trading is a lot of work. I’ll give you credit for that. ISTM it would tend to be a “winner” during generally rising markets like recent history but more like a Kamikaze dive during long downturns. You’re successfully “gaming” the insane long running bull market. So are millions of other investors. What could possibly go wrong?

davidrmoran

FD1000 said:

Generally a good topic but has low correlation to what markets do in the next 1-4-16 weeks. A trader like me is interested only in what to do now and disregards politics and economic indicators.
There are concerns all the time. My idea is to be invested most times at 99+% (like Now), and be out only when I see very high risk.

You are not seeing very high risk?

davidrmoran

I am (as posted prior) just under 100% invested in 4.25% Fido mm fund. Cash in other words.

WABAC

I haven't made any changes to the taxable lately because I don't see much I want at current prices. Whether I can be enticed to buy on a dip, or a swoon, will depend on what I observe at that time. Mr. Magic 8 Ball has been insistent that I "ask again later."

The IRA is where it is due to the process of simplification I have been going through for over a year. As I have sold off equity funds I have been less inclined to buy more of my remaining equity funds at current prices. I didn't feel the need to stay in cash, but my feelings about the persistence of inflation have kept me from getting too far out in duration.

So I can't say that current events have altered my allocations. I am doubtful that current events will lead me to a happy place where I will be willing to extend durations for the majority of my bond allocation. As previously stated, I don't know what would prompt me to buy equities.

Ipso facto: Uncertainty. QED, and all that. Mr. Market doesn't like it. I read all about it on a daily basis on the business page.

JD_co

So different levels of concern across the spectrum.

It's tough to determine how seismic political shifts will affect the economy. Tariffs and the inevitable inflation issues that follow, as well as a crumbling US govt focused on aligning with Russia are the most immediate issues in my mind.

The US is trending towards isolationism - what does that portend for our economic future? Politics do not matter...or do they?

I haven't gone 100% to cash, but I am watching events unfold. Risk off seems wise.

FD1000

hank said:

FD1000 said:

Generally a good topic but has low correlation to what markets do in the next 1-4-16 weeks. A trader like me is interested only in what to do now and disregards politics and economic indicators.
There are concerns all the time. My idea is to be invested most times at 99+% (like Now), and be out only when I see very high risk.

Trading is a lot of work. I’ll give you credit for that. ISTM it would tend to be a “winner” during generally rising markets like recent history but more like a Kamikaze dive during long downturns. You’re successfully “gaming” the insane long running bull market. So are millions of other investors. What could possibly go wrong?

hank said:

FD1000 said:

Generally a good topic but has low correlation to what markets do in the next 1-4-16 weeks. A trader like me is interested only in what to do now and disregards politics and economic indicators.
There are concerns all the time. My idea is to be invested most times at 99+% (like Now), and be out only when I see very high risk.

Trading is a lot of work. I’ll give you credit for that. ISTM it would tend to be a “winner” during generally rising markets like recent history but more like a Kamikaze dive during long downturns. You’re successfully “gaming” the insane long running bull market. So are millions of other investors. What could possibly go wrong?

Usually, you are correct but not for me.
I'm a slow trader. I hold many times for months.
I have a big portfolio and my biggest goal isn't to lose much, second goal it to make enough.
For many years, I stayed invested, never in cash, just switching funds. In that period, I held funds for years.

mskursh

I'll stay the course.

hank

FD1000 said:

”Usually, you are correct … “

If folks don’t know, FD has a little difficulty with English - it being a second language. But I need to correct the obvious incorrect statement above.

Should read: ”Usually the point about trading in bull & bear markets you made is correct”.

Thanks @FD for confirming my suspicion that “trading” is likely to work better during long running bull markets. I’m a reformed trader. Played with NSRGY for a year. “In and out” as it tumbled from under $110 all the way to $80. Of course, having sold at around $80 two ir three months ago, the stock has climbed like a rocket over the past few weeks and sits just under $100. Other than maybe a bit of trading in my group of 7 CEFs (more like frequent rebalincing) I don’t plan ever to trade again.