SUMMARY. We continue to believe many are underestimating the potential drags on growth born by future policy adjustments (taxes and regulation) and run away fiscal spending not withstanding some of the benefits. Thus, why we are watchful of growth expectations and signs of high levels of speculation in financial assets by individuals. Further the political divide is not being addressed (through prosecution of beliefs/ speech and censorship) if anything its getting worse which does not seem conducive to small business creation or expansion nor to consumer spending. We remain wary of disappointments to come to what we believe are high growth expectations. The net of this are already being felt via higher interest rates & inflation as well as higher energy prices.
INVESTMENT IMPACT. This week we eliminated our exposure to financial services sector across our model portfolios as interest rates rose. We fear such rises if continued from current levels will create a drag on the US economy. Further, we reduced our exposure to preferred stocks in reflection of higher rates and possible higher inflation to come which may erode the appeal of these types of investments. As a result, cash levels have risen considerably are now above 10% across ALL our model portfolios. We await possible opportunities to add to existing positions or initial new ones in the coming months to utilize these high cash levels. Our exposure to the utility sector (near 20%) and gold (5-6%) are meant to be defensive in nature in the event of a correction.
Our model portfolio performance has been updated on our website as of 12/31/20.
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.