Market conditions have continued to deteriorate, but Appleton Group clients have been insulated from significant losses.
Most client portfolios are currently holding a minimum of 65% cash, which is a significant change from our posture at the end of June. Clients in our Tax Managed Growth Portfolio and PLUS Portfolio strategies are also holding significant “bear market” positions, which have been appreciating solidly over the past several weeks.
We’re comfortable with our defensive posture right now, given the significant deterioration (especially in overseas markets and in the commodity markets). Generally speaking, we’re either out of or have hedged U.S. large value equities, developed international equities, international emerging market equities, U.S. mid-cap equities, U.S. small cap equities and U.S. basic material (commodity) companies.
Further adjustments are likely over the next few days.
Any commentary from Federal Reserve officials indicating that future stimulus is even a remote possibility would likely send global markets higher; however, earlier this week the St. Louis branch of the Fed admitted that there was no evidence whatsoever that any of their previous stimulus has come close to achieving their goals. This is a stunning admission, and opens the door to the possibility the future stimulus may be unlikely (at least the kind of stimulus that looks anything like what they’ve attempted before).
Without more stimulus, the economic conditions are highly likely to deteriorate further, putting additional pressure on market prices (in English, without additional stimulus, markets are in real trouble).
As always, we welcome your comments and feedback below – we’d love to hear from you!