I’m undertaking a 1000-day reinvention project, blogging here daily to track my progress. In Sunday Planning, I plan for the week ahead.
Each month, on the seventh, I evaluate positions in my portfolio (and consider positions not already in portfolio) to decide whether I should buy, hold, or sell. That’s coming up for this month.
Having reached all-time highs in the S&P 500 and the NASDAQ, does that mean it’s time to sell? The adage you always hear is “buy high and sell low” and you can’t argue about whether we’re at highs. We are! Across many asset classes.
But actually it makes sense to buy when an asset reaches an all-time high, and then only consider selling when it seems to be faltering from the heights. Here’s one simple timing rule for that: each month buy if the asset is within a 12-month high (easier than all-time highs and works just as well) and sell if the asset is no longer within 5% of the 12-month highs.
I tend to rely more upon a rule that gets me in when an asset is not expensive relative to previously but is getting some momentum coming out of a downtrend: buying when an asset’s closing price crosses their ten-month moving average and selling (at least a portion) when the closing price crosses below the ten-month MA. This one worked to get me back into the market after I had sold some positions during the Liberation Day correction. However, there are almost no assets like this right now, because so many are tapping all-time highs.
Many of my positions are within 5% of their all-time highs: gold, bitcoin, U.S. large cap stocks, developed market large caps, a variety of other foreign stock funds (small cap value), emerging market bond funds, commodity funds (except oil and gas).
So what to do, do I just add to all of these, blindly following my rule and the trend of assets reaching higher highs?
If I did this, here are positions and asset classes I would add to, based on their being within 5% of an all-time high:
- SPLG – S&P 500 index fund
- VUG – Vanguard large cap U.S. growth
- FNDX – Schwab’s large cap value fund
- IXUS – Total international ex-U.S. (this covers large cap companies outside the U.S. including Taiwan Semiconductor, SAP, Alibaba, AstraZeneca – important to know that this overlaps with many of my other foreign stock funds
- SCHE – emerging markets with China – overlaps with IXUS
- Could add to specific country or regional funds that are all all-time highs including ILF (Latin America), EWU (United Kingdom), EZU (Eurozone).
- ISVL – international small cap value
- Gold and Bitcoin, both within 5% of their highs, despite the choppiness we’ve seen from both of those recently
- GUNR – all commodity fund
- VEGI – ag commodity fund
- VWOB – emerging market bond fund
- SPPP – a physical platinum and palladium fund
- FXE – Euro currency ETF, a way to bet on the dollar weakening further
Based on the 12-month high rule, I would not add to:
- Small cap stock funds such as SCHA, VBK, VBR — although see below
- Specific country/regional funds including MCHI (China), ARGT (Argentina) that are not within 5% of highs and did not just cross the 304-day moving average
- Intermediate treasury funds, TIPS funds, TLT (long-term U.S. treasuries)
Are there any asset classes about to cross their ten-month moving average going up? In fact, there are:
- Oil and gas funds – XOP, XLE, IXC – IXC just crossed it – so I will likely add to that. IXC is a global energy ETF; I prefer it to the U.S. only ETFs XOP and XLE
- Here maybe I do need to consider adding to small cap exposure, as they are just barely above their 200-day moving averages.
- SCHH – Schwab’s real estate / REIT index fund – which I sold out of since it seemed to be such a dog – but may be time to get back in
And finally, is there anything to sell based on its moving below its ten-month average? Or having moved so its no longer within 5% of its all-time high since last month? In fact, no, I can’t find a single position like this. The only ETF I hold that is looking kind of weak according to MACD and its price relative to its 200-day MA is ASEA, a Southeast Asia fund.
What is all this positive sentiment based on? If I had to point my finger at one factor, it would be the United States’ switch from trying to cut the deficit via DOGE to instead attempting to outgrow the debt. Trump and Bessent want to run the U.S. economy hot, and this means inflation and growth in (nominal) asset values.
In a world of financial repression, where central banks hold interest rates down or take other measures to ensure they can pay off their debt (for example, some sort of mini default), bonds will do poorly, inflation will soar, and nominal asset prices including those of stocks and real estate will increase.
Louis-Vincent Gave of Gavekal Research argues that the world is entering a more fragmented, inflationary, and inventory-heavy era. The U.S. is pulling back its global reach and focusing more on the Western hemisphere. Gave suggests investors should favor assets tied to physical goods, regional trade, and commodity production, especially in Latin America. These are currently undervalued relative to U.S. equities.
I am currently enthusiastic about the following asset classes:
- Gold and Bitcoin to defend against dollar weakness and global inflationary forces
- Latin American stocks via ILF, the iShares Latin America 40 ETF, which holds the 40 largest Latin American equities
- Global energy via IXC
- Global commodities via GUNR
I am less enthusiastic about U.S. large caps, European large caps, China, emerging market funds that include China and Taiwan, and the dollar. I am also wary of U.S. small caps as I think they are more exposed to tariff-related disruption that the market is pricing in right now. However, all U.S. stocks should do okay in an environment where interest rates are held down.
So what am I going to do on Tuesday? I’m not totally sure yet, but I will likely be adding ILF, gold, bitcoin, GUNR, and IXC.