December 4, 2024: We recommend the following changes…
As we approach the end of 2024 and look ahead to next year, major indexes still carry historically high valuation and concentration risk. Yet, the market is exhibiting resilience that warrants careful and opportunistic investment outside of the most overvalued areas of the S&P 500.
Accordingly, we recommend the following changes to our Model Fund Portfolio:
- Increase the Utilities Select Sector SPDR ETF (Symbol: XLU) from 2.0% to 4.0%. The Utilities sector remains an attractive way to play both offense and defense given increasing power demand and economically resilient properties.
- Increase the Industrials Select Sector SPDR ETF (Symbol: XLI) from 6.0% to 8.0%. This sector remains favorable from a technical perspective and stands to benefit from a number of secular growth opportunities, including digitization and automation, energy sustainability, and nearshoring of supply chains and manufacturing.
In the absence of hard bear market warning flags, it is best to continue giving this bull market a healthy benefit of doubt while keeping one eye on the exit and a foot in the door. Future adjustments will be made based on changes in the weight of the evidence, and we are prepared to raise portfolio defenses by reducing allocation or implementing a portfolio hedge at the first sign of technical weakness.
The Model Fund Portfolio now has a net invested allocation of 61%, with the remainder (39%) held in short-term Treasurys or a money market fund.