Adding equities, as this bull move does not appear to be over

Author: Joseph Ollis, Everyday Capital

Covestor portfolio: Everyday Portfolio

The Everyday Portfolio selects up to 11 assets from a diversified basket of asset classes on the final trading day of each month. Below is the new allocation for the month of February as well as the performance numbers from January.  Click to read more about the Everyday Portfolio strategy.

We are now tracking and rebalancing from the end of the first trading day of the month instead of the last trading day of the month, for reasons I explained in my last post.

The Everyday Portfolio underperformed the S&P 500 in January, up 2.9% vs. the index’s 4.4% rise, due to its overweighting of less volatile assets.

February 2012 Portfolio Allocation

For the month of February, the model continues to increase equity exposure to leading asset classes, including a new position in emerging markets.


I mentioned in the beginning of the year that the portfolio is starting to increase exposure to equity as volatility lowered, suggesting a bullish move.  Many market talking heads continued their dire predictions going into 2012 and the market showed them wrong by having one of the best January returns in years.  Though the portfolio underperformed the market as it rallied higher, it still managed to capture a good portion of the gain.

Interestingly, the volatility of the market has continued to trend lower – suggesting that a sustained move higher could be possible.  I say ‘could’ because the market has managed to move up to significant overhead resistance and it would be healthy from a technical perspective if it consolidated at this point. That said, the market never does what it should – ask those market talking heads who still forecast dire outcomes for 2012 and say to not ‘follow the January barometer,’ whatever that hocus-pokus is.

The portfolio added to its equity exposure in February, but by just a slight margin, adding back emerging markets and gold. We also switched out Malaysia in favor of base metals.  The fact that base metals are leading the market from the standpoint of consistent low volatility returns suggests to me that this bull move is not yet over.

The portfolio is continued to be positioned about 60% in bonds and 40% in equities, despite the recent market performance. Though this is automatic it also seems prudent as the market is facing resistance.  Another month of low volatility moves and the portfolio will significantly ramp up its position in equities.  If resistance turns out to be stronger, the portfolio will adjust accordingly.

Regardless, I believe the Everyday Portfolio is doing what it should – making it easier to sleep at night. 🙂