Rough week, down almost 3.5% since last Friday. In hindsight the increase in stocks wasn’t the correct move. I’ll be the first to point out the strategy makes mistakes. Last February, it did the same thing pushing up into stocks right before the bottom started falling out. On the plus side though, it’s very quick to reverse a bad decision.
All three assets fell this week, so there wasn’t anywhere to hide. This is a different market than last spring. There were certainly days then when everything moved down in unison. But over longer periods something was positive.
That’s not true today, as everything fell in the month of October. The same was true in September. Geometric balancing’s performs worst during a slow bleed in multiple markets: aka, this kind of market. The strategy won’t run to cash (which would help) because the bleed doesn’t spike volatility enough. It will sometimes move towards a permanent portfolio type construction, essentially waiting for the regime to change–hopefully for the best. On October 30th, the strategy rebalanced to:
36% SPY , 36% TLT , 28% GLD
*All investing strategies come with the risk of loss, including this one. This portfolio may not be appropriate for your investment goals and requirements, and it is not investment advice.
It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list.
I thought there was a cash pressure release valve when correlations increased?
Yes, but correlations on shorter term periods haven’t increased.