November 3, 2025: An Important Portfolio Update…
As our speculative InvesTech AI Index soared to new highs last week, several important warning flags were increasing. At the same time the Federal Reserve cut short-term interest rates, long-term rates actually inched upward, and a unique Nasdaq divergence (see market insight) is being confirmed within the broader market.
This warns that the downside risk in this highly overvalued, overconcentrated, and overinvested market is escalating. In light of these developments, we are proactively implementing a strategic defensive position to reduce both portfolio volatility and risk heading into a multitude of dark storm clouds forming overhead.
We recommend the following change to our Model Fund Portfolio:
- Initiate (add) a 5% position in the Direxion Daily S&P 500 Bear 1X ETF (symbol: SPDN). This S&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.
This increases our invested equity allocation to 60%. However, with this inverse fund, it actually reduces our “net” stock market exposure in the Model Fund Portfolio to 50%. Current holdings include 55% long funds, 5% inverse bear fund, 5% in an intermediate Treasury ETF, and 35% cash held in short-term Treasurys or a money market fund.
We will be publishing a short special report later today detailing these key developments.