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This week we trimmed equity holdings on all of our portfolios.  Since early 2016, BWM Financial accounts have owned equities in excess of their respective benchmarks.  This bullish stance has corresponded with a period of strong stock market performance.  Our changes this week reduced stock holdings to our benchmark weighting in each of our portfolios (between 4% and 10%, depending on the investment objective).

We continue to view market action in 2018 as a “tug of war”.  A strong economy and corporate earnings in the U.S. seek to pull markets higher.  However, rising interest rates and increased risks for domestic policy mistakes loom.  Today, we find the weight of the evidence indicates the two sides are evenly matched.  For this reason, we bring our portfolio strategies back to benchmark equity weighting while we continue to watch our objective indicators to signal a change in either direction.

In addition, we have moved to an underweight (less than our benchmark allocation) position in international equities.  Valuations abroad do appear favorable compared to domestic stocks.  However, tactical indicators show clear signs of deteriorating momentum in international stock markets.  This is even more pronounced when compared to U.S. equities.

Many of our clients are familiar with one of our tactical rules for investing, “Don’t fight the trend”.  The chart below highlights the breakdown in international stock momentum – one reason we’re underweight foreign equities.


The blue line above (top clip of the chart) represents the global stock market (excluding U.S. companies).  The red line (bottom clip of the chart) measures the momentum of international stocks. As can be seen, the red line is approaching our bearish zone where international equities have historically performed poorly.



The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.   International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.


All indices are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. Past performance is no guarantee of future results.