Model Fund Portfolio Update August 4, 2026

International stocks continue to trade at a significant discount relative to U.S. equities, offering a more compelling margin of safety at a time when the domestic market remains historically expensive. Additionally, an allocation to international value provides greater diversification and resilience by reducing exposure to the highly concentrated Artificial Intelligence (AI) theme that dominates the S&P 500. As a result, we are recommending the following change to our Model Fund Portfolio:

• Initiate a 3% position in the Schwab Fundamental International Equity ETF (Symbol: FNDF). This fund provides diversified exposure to the international equity market with an emphasis on key company fundamentals. The strategy weighs holdings based on factors such as sales, cash flow, dividends, and valuation creating an opportunistic way to invest internationally while still maintaining a value and quality focus.  In fact, FNDF has a significantly lower P/E ratio of less than 17x while the S&P 500 trades at a very expensive 26x.  Furthermore, AI heavy Information Technology and Communication Services sectors make up almost 50% of U.S. Indexes, while FNDF has only 16% in these areas.  In contrast, key themes overseas include real assets, industrial modernization, defense, and capitalizing on the strength of a global consumer.

Following this change, the Model Fund Portfolio is comprised of 59.5% long positions, 5% in an inverse index ETF, 5% in an intermediate Treasury ETF, and 30.5% cash held in short-term Treasurys or a money market fund. This results in 54.5% net equity exposure.