The 3s Report: "Just Tariffic!"
From timely to timeless, the 3 most important points we can make about stocks, bonds, ETFs, markets and investing...updated weekly
ROAR Score weekly update
Our "Reward Opportunity and Risk" (ROAR) score remains at 30 for the third consecutive week.
This means a 2-ETF portfolio that can only be allocated to SPY and BIL would be 30% SPY and 70% BIL.
Having more than 3 years of live performance on this simple yet effective 2-ETF portfolio is really helping to explain why I feel so strongly about it use as a "springboard" for all of the detailed work I do beyond that. More on that below.
3 Quick Thoughts on markets
I'm apolitical as an investor. I'll just say that tariff talk makes investing more difficult. Monday's on/off negotiations and the media circus around it made for what I'd consider one of the 10 strangest days of my nearly 38-year investing career. And yet it settled nothing.
That's been the case for a while now, and sets up a clearer line in the sand for S&P 500 (and thus the ROAR Score). As for when it will flinch, who knows?
The first 2 "index" charts below explain this further, but the key is that the market has become "binary" again. That is, macro news dominates and dictates price action across a wide swath of the stock and bond markets. That's fine, except that it takes away the value of finding pockets of opportunity ("alpha"). And, this is often what happens before market storms ensue. We'll see.
3 ETF (or index) charts I’m watching
Meet that line in the sand. The up-sloping yellow line connects the dots for the S&P 500 since the "AI rally" started during Q4 2023. Since then, AI = win and most other segments of the stock market struggled to create green instead of red. So if that line breaks decisively (and not as a "flash crash") the market's "story" will flip on its head. That's a risk management consideration, not a prediction. Who can predict the stock market with any consistent accuracy in this environment? I'm not trying, and adjusting my approach to the current realities, as our Sungarden YARP Portfolio subscribers know.
Since that same period, about 2 1/2 years ago, the 2-ETF SPY-BIL portfolio I run has been neck and neck with a "moderate" allocation ETF (AOM) and the average stock of the 1,000 largest in the US (EQAL). And it did so while never dropping even 3% from its peak at any point. Takeaway: the more irrational markets behave, the simpler I think we need to approach them.
So, I own a gold investment again. Not that I'm happy about it! I do not like gold, but I DO like making money. And as explained in my subscriber note yesterday, the manner in which I am participating in what I think could be a temporary (or longer) acceleration in the gold rally is in line with my broader take on markets in early 2025: take risk, but do so on MY terms. If you're not sure what I mean, just ask.
3 stock charts I’m watching
Every week seems to bring another parade of "busted" blue chip stocks. This is not a good sign historically, but unless/until the high-fliers come down with it, the bifurcated market will continue. Here are 3 I wrote about negatively in Seeking Alpha over the past 3-4 months.
Pepsi: down 20% since October
Hershey: down 30% since December, and nearly 50% since 2023 (you know, during the stock "bull market")
Super Micro Computer: up 4-fold (300%) in 7 months...then gave every penny of it back (-75%) in just 11 months
Final thoughts for now
One thing those 3 stocks have in common: in that site's comments section, I received the closest thing I've had in my career to "hate mail." Every insult in the book LOL. For what it is worth, I have not been involved in those 3 other than some minor trading stuff, and for a brief time with HSY, selling before the collapse.
What does that tell me, based on past cycles? Too many investors are treating investing like a sport, and their stocks like their favorite children. Let's remind ourselves that the stocks don't care about us. Treat them like the inanimate objects they are, and the tool to make profit and manage risk that they represent.
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