Monthly Asset Allocation Review: Market Status and Investment Strategies

The updated monthly asset allocation table is now available here.

This is almost a perfect status quo with last month. The signals are all in the red, except for real estate which is a permanent allocation. The target cash share is down a little, to 38%, because the trend on Japanese stocks is very slightly less bearish than last month (but it nevertheless remains well oriented negatively).

At the risk of repeating myself, all this does not bode well. So far, American and Swiss stocks are holding up, despite very high valuations. However, the day the US market really crashes (and not just a small correction like we have had twice this year), all stocks on the planet risk going into a tailspin.

I say that this does not bode well, but on the other hand, somewhat selfishly it is true, I am delighted. I have been waiting for this for several months. Since last year I have in fact reoriented my positions towards less exposed and less expensive securities, but still of quality. Since this year I have also significantly increased my proportion of cash. During this time the US market has nevertheless continued to progress, despite prices disconnected from reality.

As a result of all this, despite a good start to the year, I find myself with a performance less good than the S&P 500. This reminds me of a phenomenon that we had already experienced at the end of the last century, just before the bursting of the Internet bubble. Cheap quality stocks were stagnating or falling, while web startups, which had never made a profit, climbed to the firmament. I console myself by telling myself that even if I am doing less well than the S&P 500, I am very close to the Swiss Performance Index and much better than most other European and global indices.

I tell myself that in the event of a crash, it would be the expensive stocks that would suffer the most, and especially for longer. On the contrary, the rare stocks that are currently trading at reasonable prices would certainly cough a little at first, but would quickly take off after the storm. In addition, with a cash share of 44% (even higher than my target allocation), I really have what it takes to go hunting for good deals when the sales time comes.

I'll come back to these aspects when I write my 2018 review in a month. Perhaps things will have already moved by then, even if the holiday season is not usually conducive to major stock market movements.