Blitz Index Update
What is it?
The Blitz Index is a tool we use to gauge the market environment we are in. We may be better suited to invest for the future with an understanding of what we think are important factors. We use the Blitz Index to combine the past performance of the market with other economic factors. Included in those factors are consumer debt, actions by the Federal Reserve, and interest rates.
Why does it matter?
Last month the Blitz Index was at a 0% invested level. At the beginning of December, that is still the case. While stocks have seen some gains in the last month, the other market conditions do not cater to a growth environment. We believe that the markets will have a hard time continuing this short-term bounce in stock values. For that reason, we are keeping a risk-off allocation to protect from the possible downside risk in stocks at this time.
BlackRock’s Larry Fink is worried
What is it?
“BlackRock Chief Executive Officer Larry Fink is confident inflation will subside but fears the global economy is headed toward anemic growth as geopolitical circumstances evolve and central banks around the world take years to unwind fiscal stimulus.”*
With those factors at play, Fink expects weak growth in the short term future. We align with his stance as we expect companies to have lower earnings than they were predicting months ago. With a strong employment rate and inflation remaining high, we believe the Fed will need to keep Interest rates high for longer than they predicted in order to bring back price stability. While they may be slowing the rate at which they are raising rates, they are continuing to raise rates which will impact all new lending or financing.
Why does it matter?
“BlackRock stated that it was tactically underweight stocks for this reason — a portfolio positioning revealed earlier this year. While the money manager expects to turn positive on risk assets at some point in 2023, it no longer sees the sustained bull markets of the past.”*
There is not much optimism by one of the world’s largest firms. Our outlook is similar to theirs and until conditions change we will limit stock exposure. While we anticipate future bull markets, it may take a while until a larger growth phase of the investment cycle returns.
Other articles we found interesting this week:
Elon Musk Fears Economic Disaster if This Is Not Done Immediately
Classic 60/40 investing strategy sees worst return in 100 years
Powell downs US Dollar, eyes on key inflation and PMI data
Current 401(k) portfolio
Our last portfolio reallocation: 5/19/2022.
Want more information?
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.
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Sources:
*Alexandra Semenova. “BlackRock’s Larry Fink is worried about economic ‘malaise’ ahead”. 12/1/2022. Yahoo Finance. https://finance.yahoo.com/news/blackrock-larry-fink-economic-outlook-2023-114506393.html
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