Monthly Asset Allocation Strategies: Navigating a Down Market and Optimizing Your Portfolio

The updated monthly asset allocation table is now available here.

The negative trend observed in recent months on certain stock markets has spread to all regions. Now, even Switzerland and the United States are following a clearly downward trend. All signals on stocks are therefore in the red. Let us note, however, on the positive side, that this has the merit of bringing valuations back to more correct levels. Indeed, if Swiss and American stocks remain, despite the correction, extremely expensive, European stocks are becoming quite interesting, and here I am not even talking about emerging countries or Japan which are really very tempting from a price point of view. This could lead to nice opportunities when the market has calmed down.

From the point of view of long-term Confederation bonds, the positive trend continues and even strengthens. Be careful, however, because here we have the opposite problem of equities since valuations are less and less attractive in view of the low interest rates (even negative). We can clearly see the negative correlation that exists between long-term bonds and equities, an effect that can be appreciable in a portfolio under certain conditions, which are not necessarily met at the moment.

Conversely, gold is particularly benefiting from its role as a safe haven. The yellow metal is returning to a positive trend after a decline of several months. Its price is also attractive compared to that of shares. I had parted with it six months ago because of a negative trend in its price, so I am now returning to it, to the tune of 6% of my portfolio. The sale-purchase transactions carried out will have been practically zero in terms of price, since they were carried out at almost the same price. So there are still some transaction costs, but they will have at least reduced the volatility of the portfolio during this six-month period.

For the other asset classes, no change: real estate remains invested at 15% as a permanent allocation and the leverage alternative strategy is still waiting its turn, that is to say when the American market will be attractive again and in a positive trend, which is not going to happen tomorrow!

As for cash, the target allocation explodes to 76% in view of the negative evolution of the stock price. My actual cash allocation increased sharply in 2018, to nearly 50% of my portfolio. Going up to 3/4 cash would mean selling almost all my stocks, since the rest of the portfolio is made up of gold and real estate. We will see if I am ready to take this step. It will mainly depend on the behavior and fundamentals of the twenty or so positions I still have (I was at a hundred not so long ago). The last survivors seem to me to be well equipped to weather the crisis, but you never know...

Happy New Year 2019 to all my readers and thank you for your loyalty.