Fall is here.
Faced with the high probability U.S. Equities is in for a correction, if not worse, how should an investor manage their portfolio? The decision is much easier for Sector BPI portfolios such as the McClintock, Carson, and Franklin as this investing model is designed to take advantage of market volatility. The decision is not quite so easy for Asset Allocation portfolios held by retirees. If one is young and still in the savings mode, continue to save, diversify, and dollar-cost-average regardless of market fluctuations. I will define “young” as someone who has 15 or more years to save and recover from a major draw-down.
Why choose a 15-year time horizon? a) It took 15 years or longer to recover from the Great Depression. b) It took 15 or slightly longer to recover from stagflation that existed through the 1970s. Inflation was out of control in the late 1970s and early 1980s until FED Chairman Paul Volcker turned up the interest rate screws in order to bring inflation under control.
The Schrodinger portfolio is a special case as it is managed by the Schwab computers and is known as a Robo Advisor portfolio. Schwab refers to these computer managed portfolios as Intelligent Portfolios. We are likely to see how intelligent they are in 2026. The Schrodinger comes up for its next review later this month.
With the various Asset Allocation portfolios such as Bohr and Bethe I am reducing exposure to the S&P 500 (VOO) and increasing the percentage in lower volatile asset classes as well as increasing exposure to developed international equities (VEA) and emerging markets (VWO). Check out the two links at the bottom of this blog post. Emerging markets are fast moving into world leadership. The principle countries are known as BRICS. Ten countries now make up BRICS with Brazil, India, and China as the major players.
“BRICS is an intergovernmental organization comprising ten countries: Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Indonesia, Iran and the United Arab Emirates.”
McClintock Sector BPI Holdings
Where are we with the McClintock portfolio holdings? Only one sector is held in the McClintock. When Health dropped into the 30% bullish zone I nearly broke the Sector BPI basic rule of purchasing when a sector drops to the 30% bullish level or below. I missed out on an opportunity as Health jumped from the low 30s to an overbought position.
With the market at or near an all-time high I am investing excess cash in SHV rather than adding a few more shares of VOO. The interest rate for SHV recently dropped to 4.36%.
SHV is a holding position until one or more sectors drop into the oversold Bullish Percent Indicator (BPI) bullish zone of 30% or lower. There is an abundance of blog material available within ITA explaining the Sector BPI investing model. This is a unique approach to investing. At least I have not found it elsewhere. If you have questions or comments, leave them in the Comment section provided below.
McClintock Performance Data
Since late 2021 the McClintock has outperformed the AOR benchmark, but not the S&P 500 (SPY). Keep in mind this portfolio has not been using the Sector BPI model over this entire time period.
I just checked to see how the McClintock portfolio performed over the past two years of Sector BPI operation. The McClintock returned 60.5% over this two-year period while the S&P 500 returned 62.7%. Call it close to a dead heat.
McClintock Risk Ratios
Of critical importance it the continued growth in the Jensen Performance Index over the past year. Each of the four risk ratio metrics improved over this period.
Should we see a correction (10% drop) or worse it will be most interesting to see how the three mechanical Sector BPI portfolios perform.
More on the National Debt
Even more on National Debt and National Security
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