The Diversified ETFs model account is currently positioned to weather either a sharp move down or a sharp move up in global equities. When I look at the S&P 500 index (SPX) chart from across the room, it still looks like a bull market. The quantitative strategy also reflects this view by holding a large position in the SPDR S&P 500 ETF Trust Fund (SPY).
This position is diversified or hedged with long bonds, a short China position, gold, and commodities. The main change in the approach from May is that a short China position
replaces a short oil position. Both China and oil prices turn down quickly and dramatically when US markets stumble, that is why they are useful for hedging and diversification.
The way I think of the portfolio is in three parts, two of which could stand alone. First, there is the long S&P and short China portfolio. Second, there is the long bond and commodity portfolio. Finally, gold is added to those two portfolios to pick up additional diversification.
