The 3s Report: Is That All There Is?!
ROAR Score weekly update
Our "Reward Opportunity and Risk" (ROAR) score remains at 40 for the ninth consecutive week.
This means a conservative 2-ETF portfolio that can only be allocated to SPY and BIL would now be 40% SPY and 60% BIL.
And, a more moderate-risk portfolio would be at 70% SPY and 30% BIL. That's taking a 50% minimum SPY allocation, and applying the ROAR Score to the other 50% of the portfolio.
3 Quick Thoughts on markets
The ROAR Score was created as a snapshot, bottom-line, single data point that could encompass my entire current view on the balance between reward and risk. 40 out of 100 is where we've been since May 13 of this year.
However, after minimizing losses during the chaos of February through early April, ROAR was increased from 10 to 30 on April 29, before lifting to 40 just 2 weeks later. SPY is up 12% in the 10 weeks since that initial ROAR increase from 10 to 30. We're feeling pretty good about how ROAR, and thus Sungarden portfolios in general, is doing through this manic market.
But as the title of this week's issue states, it appears that Tariffs and the Fed are about all that moves stock and bond prices these days. Perhaps that will change when earnings begin soon. But this is causing a situation I've seen in recent years to re-occur. Namely, that stocks can rally hard, especially when they're down on their luck. But sustaining those moves is the problem. Examples below.
3 ETF (or index) charts I’m watching
Warren Buffett talks about having 3 trays on his desk: in, out and too tough! This one is too geopolitical, too much in regulatory flux, and thus too tough. Even if it shows little hints of wanting to move higher.
Ah, there's a good example of what I'm seeing "all over the place" recently. Strong move by this sector ETFs, which is 39% combined in AMZN and TSLA, with HD adding another 7% weight. Those 3 plus the other half of this ETF's portfolio are showing mixed signals, not surprising after a tidy run of nearly 30% since early April.
I just started building a Treasury securities ladder for my family. I did it knowing that there was a chance bond prices could drop/rates rise. Which is why I also have "disaster puts" on TLT. Yes, you can hedge just about anything.
Final thoughts for now
The stock market has, and likely will continue to be, more consolidated in terms of opportunities. In other words, investors will be challenged to identify stocks and ETFs that they can look back on a while later and say, "that was better than just allocating to SPY and a few other positions around the edges."
However, that condition will have periods of respite, where certain stocks and sectors will have their "runs." Like an NBA team down by 30 points that cuts the lead to 10, but ultimately loses by 20 (let me know if that makes sense!).
Bottom line: tactical investing around a hedged core portfolio is my weapon of choice. And the further out we get from the pandemic, when so much of the market's "formula" changed, the more I'm convinced, this is the new "asset allocation."
But how many investors will realize it before they need to learn from experience?