Don’t Fight the Fed
What is it?
“Chase CEO Jamie Dimon is raising the specter of the war on inflation getting worse before it gets better. Dimon warned ‘I am not sure if the world is prepared for 7%,’ Dimon told the paper.”*
If rates go to 6% or even 7% we will see who got overleveraged and took on too much risk. However, if rates stay where they are it could still put stress on the market if sustained for a long time. Companies that are having a hard time now may need to lower risk due to the possibility of a cold winter with high interest rates.
Why does it matter?
“The comments added to ongoing nervousness on Wall Street, which has been fueled in large part by concerns about the Fed keeping interest rates high for longer.”*
The Fed could stunt further growth with interest rates used to slow inflation. Investors will be looking to gain a clearer picture of the months to come. The Fed can help although they have maintained the same stance for months. Markets have broken down slightly in recent trading. However, it could take more pressure from buyers or sellers to avoid consolidating around this price level.
Blitz Index Update
What is it?
Here is a look at the Blitz Index. It was created by Legendary investor Martin Zweig and updated for current markets. A high score of ten indicates to be fully invested while a low score of zero suggests to not be invested in the markets.
As you can see there are no points for the Prime Rate or the Fed and there are 2 points contributed for both Installment Debt and the 4% gain or loss column. This score has not changed from the previous month.
Prime rate deals with interest rates and like most other sections can contribute zero or two points. The Fed can actually go up to 4 points based on how they want to handle things. Installment debt measures consumer spending trends and the 4% rule takes into account performance of a specific benchmark.
Why does it matter?
Like Martin Zweig, we believe these factors can help us to invest portfolios in a way that is suitable for our clients regardless of the market environment. With that we don’t hold investments we like no matter the market conditions or performance. Our tactical approach allows us to buy into and sell out of positions as we see fit. At 4/10 the Blitz index suggests to be 50% invested in the markets which is relatively close to our current positioning for some portfolios.
Other articles we found interesting this week:
Current 401(k) portfolio
Our last 401(k) portfolio reallocation: 8/14/2023.
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.
*Matt Egan. “JPMorgan CEO Jamie Dimon warns the world isn’t ready for 7% interest rate”. 9/26/2023. https://www.cnn.com/2023/09/26/economy/jamie-dimon-7-interest-rate/index.html
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