Written by Lance Roberts, Clarity Financial
As I noted last week:
“With ‘coronavirus cases’ likely to rise sharply following Memorial Day celebrations and recent crowded protests, the risk of disappointment has risen. Such has been an exceptionally rally. All of our equity positions are now extremely stretched and overbought. Conversely, all of our hedges VERY oversold.”
That reversion happened this past week, with our hedges of Treasury bonds and the U.S. dollar offsetting the decline in our longs on Thursday.
We did use the secondary retest of the 200-dma on Friday to add some “Pandemic exposure” stocks back to our portfolio. As we detailed to our RIAPRO subscribers (30-day Risk-Free Trial).
“After the market dropped over 5% yesterday and successfully tested the 200-day moving average, we made slight additions to the portfolios. The positions are small, and we remain vigilant to potentially more downside as the S&P 500 sits on top of its 200-day moving average.
Equity Portfolio Buys
- CMCSA – Initiate 1% position
- CSCO – Initiate 1% position
ETF Portfolio Buys
- XLE – Add 1% to bring total to 2%
- XLP – Add 1% to bring total to 5.5%
We continue to hold our TLT and UUP positions for now as a hedge.”
As discussed over the last several weeks, we have slowly added equity exposure in areas we like. However, we focus on dividend yield, and continue to hedge increases in equity risk with offsetting hedges. We also still carry a higher than normal level of cash.
This is a very risky market. Caution is advised.
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