INVESTMENT UPDATES

Most forecasts assume the market is going somewhere. Every year starts with a list of them. Where rates will end up. What oil will do. How far stocks can run. Up or down, each one picks a direction.

This summer, the market mostly went nowhere. Stocks stalled after a strong start. Bonds fell at the same time. The part of the portfolio meant to provide stability didn’t.

Navigating that on forecasts would have meant calling three things at once:

1. The 10-year Treasury yield breaking above 5%
2. Oil rallying hard on top of it.
3. Stocks stalling without ever breaking down.

We would rather respond to what markets are doing than depend on calling all three.

This month’s Note looks at a summer that tested traditional portfolios, why the ability to adapt matters more than the ability to predict, and what a systematic investing process does when markets rise, fall, or go nowhere.

But first, here’s a summary of the global asset classes utilized in our portfolios and their exposures for October.

Every market seems to develop a group of stocks everyone generally agrees on. For the last several years, that group had seven members and a nickname.

Owning them worked. Not owning them cost you. And the longer that went on, the more it started to look like a rule instead of a stretch of very good performance.

This year, the group has been quiet and the market has gone up anyway.

Recognizing a change like that in advance sounds easier than it is. You would have needed to know when the old leadership was ending. Then what would replace it. Then when the new leadership was established enough to act on. We would rather require evidence than depend on getting that sequence right.

This month’s Note digs into the changing leadership in U.S. equities, the cost of waiting for confirmation, and why a systematic invest process does not need to be the first to recognize a new trend.

But first, here’s a summary of the global asset classes utilized in our portfolios and their exposures for September.