INVESTECH MODEL FUND PORTFOLIO
Thursday April 16, 2026: We recommended the following change to our Model Fund Portfolio
This year got off to a rocky start and as risks increased prior to the conflict in the Middle East, we stepped up the allocation to our bear market fund in February. This position significantly helped reduce volatility in the first quarter and kept our Model Fund Portfolio in positive territory despite the sharp correction in the market.
While longer-term economic and market risks remain, major indexes have now rallied off their lows. Due to the easing of bearish Distribution and initial reemergence of a Selling Vacuum in our Negative Leadership Composite (NLC), we are incrementally trimming one layer of defense in the Model Fund Portfolio with the following change:
- Decrease the Direxion Daily S&P 500 Bear 1X ETF (Symbol: SPDN) from 7% to 5%. This holding was critical to the strength of the Model Fund Portfolio through market volatility earlier this year, and we are continuing to hold a 5% hedge as protection against the current market risk.
Following this change, the Model Fund Portfolio is comprised of 58% long positions, 5% in an inverse index ETF, 5% in an intermediate Treasury ETF, and 32% cash held in short-term Treasurys or a money market fund. This results in 53% net equity exposure.
MACROECONOMIC UPDATE
Macroeconomic releases this week painted a worrisome picture for the housing market and the broader economy.
- Existing Home Sales fell -3.6% in March, while inventory increased 3.0%. Home sales are now 1% lower than they were a year ago, and the National Association of Realtors cut its housing forecast for the year.
- The National Association of Home Builders (NAHB) Housing Market Index also showed trouble in the housing market as it dropped 4 points to 34 in April. A reading below 50 indicates pessimism regarding the current and near-term outlook among home builders.
- Slowing sales together with falling optimism from home builders warn that the housing market will likely continue to slow.
- The National Federation of Independent Businesses (NFIB) Small Businesses Optimism Index dropped 3 points in March to 95.8 – its lowest level since October 2024. Business owners expressed concerns regarding rising costs and slowing sales.
- The Producer Price Index (PPI) showed rapidly rising prices as it rose 4.0% year-over-year in the largest increase since February 2023. Rising PPI can translate into higher consumer inflation as price increases are passed down the supply chain.
TECHNICAL UPDATE
Technical indicators showed that imminent downside risk is subsiding as markets continue their relief rally from the ceasefire with Iran.
- The bullish Selling Vacuum reemerged in InvesTech’s time-tested Negative Leadership Composite (NLC), indicating that immediate downside potential has begun to recede. The NLC will be a vital guide over the coming weeks as the stock market searches for direction. A sustained increase in the Selling Vacuum would signal that further bear market defenses may no longer be necessary. A resurgence of bearish Distribution, however, would be a critical warning that downside risk is increasing.
- InvesTech’s Artificial Intelligence (AI) and Gorilla Indexes rallied this week as major indexes hit new highs and investors piled back in to high-risk speculative stocks and mega-cap momentum favorites. Both of these indexes will be essential to watch –especially through this volatile period– as where these stocks go, the rest of the market will likely follow.
Latest issue of InvesTech Research out later today!
The stock market and the U.S. economy have had a turbulent start to the year and, despite a relief rally on the news of a ceasefire with Iran, leading indicators question whether smooth sailing is on the horizon…
The latest issue of InvesTech Research dives into these critical developments, and it is one you won’t want to miss!