top of page

BCA Weekly Commentary 8/20/21: Trifecta of Risk

Updated: Aug 22, 2021

SUMMARY. Our caution on a slowing US economy and its implications on asset prices continues tied to a trifecta of risks: 1) Waning positive effects fiscal stimulus; 2) Threats of sustained Inflation; 3) Threat of Federal Reserve tightening or slower bond purchases (which tends to keep rates low). We continue to assume slowing economic growth as we move through 2022. We do not view any additional fiscal stimulus as being nothing more than temporarily adding to growth. Moreover, adding to inflation pressure plus raising taxes and accelerating the Federal Reserves actions to reduce QE.

INVESTMENT IMPACT. Besides the above and that fact that many stocks have sold off post earnings reports that generally were in line or better is the "breath" of the market overall. "Breath" generally refers to the number of stocks that are rising or falling when accessing the strength of a market move. Currently, that "breath" is telling us of caution ahead. According to "In the equity market, while the S&P 500 may only be 2% or so from its record highs, the average stock is down 15.8% from its 52-week highs." This backed up by the following graphs by them:

200DMA refers to the number of stocks above their 200 Day Moving Averages of prices. The conclusion is that even though the indices appear rising the rest of the market generally isn't.

As a result of all of the above both our cash/bond levels remain elevated across all our model portfolios and equity exposure net of hedges remains very low (in the 20's).

Our model portfolio performance has been updated on our website as of 7/30/21.

For more insights see our website and disclosures found there at BCA. The thoughts contained in this newsletters are intended lend insights into BCAs current & future thinking on changes to BCA model portfolios. They are not intended to be recommendations and should not be taken as such. As always contact us for further explanation of how these events can affect your finances. To unsubscribe from our newsletters & website please email us with "unsubscribe" in the subject.

6 views0 comments


bottom of page