Cash is King
What is it?
Lately, the companies that are holding more cash on a percentage basis are outperforming the companies using more leverage.*
“Chatter is also building on the hefty debt raising the Treasury will have to do quickly once a deal goes through. Indeed, cash-to-total assets has been the best long-short factor this year for global equities, led by the U.S.”*
Why does it matter?
The U.S. and Europe are the most leveraged regions.* While last week the markets finished strong, we will see how factors such as the Federal Reserve come into play. With relatively higher leverage, the U.S. could outgrow other markets if conditions become more optimistic. However, if the markets make a turn for the worse then some companies may find themselves over-leveraged for higher interest rates. The companies with cash may be better suited to weather the storm.
Blitz Index Update
What is it?
The Blitz Index is a tool we created based on a book from the legendary investor Martin Zweig.** The Blitz index determines how far invested to be (from 0% to 100%) based on some key factors. The updated version takes into account specific aspects of: interest rates, actions by the U.S. Federal Reserve, Consumer Debt, and stock performance.
Why does it matter?
The Blitz Index currently recommends to invest 50% in the portfolio. That is about where we are on some models. Interest rates and the Fed are still limiting the market’s move higher. However, while there is increased debt for consumers it is rising at a modest rate. Also, stock performance has done better lately as more companies are beginning to rise.
Other articles we found interesting this week:
Current 401(k) portfolio
Our last 401(k) 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.
*Barbara Kollmeyer. “Cash is now king and these companies have plenty”. 6/1/2023. Market Watch.
**Martin Zweig. “Winning on Wall Street”. 12/12/1970. Grand Central Publishing.
***St.Louis Fed. “Non-revolving Consumer Credit Owned and Securitized”. 05/05/2023. Board of Governors of the Federal Reserve System (US). https://fred.stlouisfed.org/data/NONREVNS.txt
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