Defensive Stocks Prevail
What is it?
Markets have been struggling to make new highs lately. However, defensive stocks like the Invesco S&P 500 Low Volatility ETF (SPLV) have been outperforming the broader U.S. market index such as SPY. This is shown in the chart below from Yahoo Finance. Over the last three months ending on April 13th, 2022 SPLV (Orange) is up 2.2% while the benchmark SPY (Blue) is down 5.6%.
Why does it matter?
As defensive stocks got overbought last week we decided to sell some on Thursday. This allowed us to realize some gains in various portfolios. We did this by selling a small number of our positions in defensive stock sector ETFs along with SPLV.
What is it?
The Blitz Index is a tool we created to help determine how aggressive our stock allocation should be. When factors that include changes in monetary policy, interest rates, and stock performance are bullish then we are more likely to add to our target exposure. It is our version of the Super Model which was create by legendary investor Martin Zweig. When factors are becoming more bearish, then our long equity exposure may be lowered accordingly.
While we analyze data daily around investments, the Blitz Index is beneficial since it provides a less volatile form of analysis. The Blitz index uses variables that change typically on a weekly or monthly basis. We believe that these monthly and weekly data points are more important than the day-to-day changes or noise in the markets.
Why does it matter?
The Blitz Index is currently showing a score of 4 out of 10 which is relatively bearish. Which is more evidence that we can take to justify our decision to lower stock market exposure.
Other articles we found interesting this week:
Current 401(k) portfolio
Our last portfolio reallocation: 4/11/2022.
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The weekly market insight provides a window into the process we use in our investment management process. At Breakaway, we believe markets are always changing and require a nimble yet data-oriented approach.
Our process attempts to identify trends and momentum in the financial markets. With that information, we align our clients’ portfolio accordingly in the hope to help our clients accomplish their life goals while attempting to lower the risk of a large drop in their portfolio.
*Yahoo Finance Chart. “Invesco S&P 500 Low Volatility ETF (SPLV)”. 4/14/2022. Yahoo Finance. https://finance.yahoo.com/quote/SPLV/chart?p=SPLV
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