posted on 07 February 2017
The Real 401(k) Plan Manager - A Conservative Strategy For Long-Term Investors
Trump - Week Two
First, the answer is “NO." I am not going to continue counting the number of weeks of the Trump Presidency.
Secondly, as reiterated last week:
Well. That happened and I got to put my “Dow 20,000" hat back on again.
While there really isn’t any “bad news" to speak of, but the extension of the market continues to remain extreme. A correction is needed to allow for an increase in 401k exposure for the remainder of the “seasonally strong" period. As noted above, we are in the early stages of a “risk off" rotation which suggests a mild correction is likely in store during February.
With buy signals on all three indicators registered currently, any corrections are likely to be somewhat limited back to the rising short to intermediate-term moving averages.
This would suggest a correction back to 2250 on the S&P 500 would likely be a “buyable" trading level. As noted in the chart above, the current extension above the moving average will likely be corrected in fairly short order. Such a correction will relieve some of the extreme overbought conditions that currently exist and allow for additional risk exposure in portfolios if needed.
As suggested last week, due to the current extremes on many fronts, investment risk remains elevated which is why I have not increased the allocation model to 100% as of yet. This is also why I have suggested over the last couple of weeks to use this current advance, and extension, as an opportunity to clean up portfolios. (Use guidelines noted previously.)
If we can get a correction that resolves the overbought, extended and excessively bullish backdrop to the markets currently, I WILL increase the allocation model to 100%. For now, we will wait and let the markets tell us what it wants to do next.
If you need help after reading the alert; don’t hesitate to contact me.
Current 401-k Allocation Model
The 401k plan allocation plan below follows the K.I.S.S. principal. By keeping the allocation extremely simplified it allows for better control of the allocation and a closer tracking to the benchmark objective over time. (If you want to make it more complicated you can, however, statistics show that simply adding more funds does not increase performance to any great degree.)
401k Choice Matching List
The list below shows sample 401k plan funds for each major category. In reality, the majority of funds all track their indices fairly closely. Therefore, if you don’t see your exact fund listed, look for a fund that is similar in nature.
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