Blitz Index Update
What is it?
The Blitz index is a tool we use to help us determine if the current market environment is favorable to invest in. By taking different data and calculating their rate of change we get an idea of how the market may continue to change. The Blitz Index accounts for: interest rates, actions by the Federal Reserve, consumer debt, and recent performance of the market.
Why does it matter?
Interest rates have not dropped, and the Fed is maintaining its stance to slow inflation. Because of that, the blitz index is not signaling for us to be fully invested. At a current score of 4/10 the Blitz index recommends a 50% invested level. We are adding more exposure to some investments that have some more upside without being overbought. Current investments that are overbought we plan to reduce exposure to as a part of our strategy to lock in gains and limit downside risk.
Higher Rates May Cause a Harder Landing
What is it?
The Federal Reserve is planning to increase interest rates further. With that in mind some investors are “preparing for a harder landing. Daniel Ivascyn, chief investment officer at PIMCO, told the Financial Times in an interview published on Sunday.”*
Why does it matter?
PIMCO is a “U.S. bond giant” so their perspective provides insight to what their experts believe the bond market is anticipating.* With more rate increases there is greater uncertainty for what lies ahead. “Ivascyn noted that when rates have risen in the past, a lag of five or six quarters for the impact to be felt has been ‘the norm’.”*
While the banks suffered not long ago, there could be a more widespread sell off if the heightened interest rates prove to be too much to handle. With that, student loan payments are coming back at the end of August. Those payments will add a burden to the budgets of many people that have not had to pay down student loans in years.
Other articles we found interesting this week:
The Housing Market Is Heating Back Up. That’s a Problem for the Fed.
What’s at stake for stock and bond investors in second half of 2023
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.
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Sources:
*Reuters. “PIMCO CIO says preparing for ‘harder landing’”. Reuters. 7/1/2023. https://www.reuters.com/business/finance/pimco-cio-says-preparing-harder-landing-global-economy-ft-2023-07-02/#:~:text=July%202%20(Reuters)%20%2D%20Pacific,an%20interview%20published%20on%20Sunday.
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