January 10, 2025: We recommend the following changes…
As we continue into 2025, market valuations remain historically high by virtually all measures and investor sentiment is complacent if not frothy. Despite this optimism, worries over the future path of inflation are surging. Market leadership continues to deteriorate and the bearish Distribution component of our Negative Leadership Composite (NLC) will pass the -20 threshold today.
As a result, we recommend the following change to our Model Fund Portfolio:
- Initiate a 3% position in the Direxion Daily S&P 500 Bear 1X ETF (symbol: SPDN). ThisS&P 500 inverse index fund incrementally raises portfolio defenses. For more information about inverse index funds or to see alternative options to SPDN, please see The “Bare Necessities” About Bear Funds in the Subscriber Library.
Due to the inverse nature of this fund, it reduces our “net” long position in the Model Fund Portfolio to 58%. Current holdings include 61% long funds, 3% inverse bear fund, and 36% cash. The cash portion of the Portfolio (36%) is held in short-term Treasurys or a money market fund. We will take additional defensive measures if warning flags continue to increase in the days and weeks ahead.