In today’s briefing:
- Trend Asset Allocation Model Update: Still Cautious
- Trust the Thrust, or Sell in May?
Trend Asset Allocation Model Update: Still Cautious
- Our Trend Asset Allocation Model is a market timing model with a record from 2013. A model portfolio using its out-of-sample signals achieved 85/15 like returns with 60/40 like risk.
- Our review shows that the main components of the global economy are either weak or neutral.
- This calls for a risk-off defensive posture to portfolio construction. Trump’s trade wars have only just begun and recession risk is rising.
Trust the Thrust, or Sell in May?
- We are seeing a resurgence of buy signals, or at least constructive signs for stock prices.
- Against that, the stock market is also facing a number of bearish headwinds, such as the “Sell in May” negative seasonality influence.
- We believe the intermediate path of equity prices is down. However, the reflex rally is a much-hated one and the short-term pain trade may be up.
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