Portfolio Protection Status
January 8, 2016
For the first week in January, the S&P 500 and the Dow Jones Industrial Average had their worst ever yearly opening as deterioration in the Chinese stock market raised concerns about global growth. As a result, my Portfolio Protection strategy (see "Investment Process" for a description) ended the week with two of the three protection criteria having triggered -- an indication that it might be a good time to consider taking some equity risk off the table.
As you may have read in my 2016 Fearless Forecast, a slowdown in global growth, together with deteriorating market breadth and a weak outlook for corporate profits represent the source of downside risk I see for the market this year. If this is what we're seeing in this first week, it's happening faster than I expected. Investors should have a plan in place for dealing with a signficant market correction that is consistent with their risk tolerance.
September 14, 2015
As of the end of the day on September 14, 2015, the Portfolio Protection strategy (see my Investment Process for background) deteriorated a bit from the prior week but is a bit improved on the month. The worsening momentum is troubling. At this point, I can't be sure whether this is due to uncertainty about the Fed's move on interest rates this month or increasing concern about a global slowdown led by China -- those being the two critical issues as far as I can tell. Once we get past the Fed decision, I hope we'll have a better idea where the market is headed.