INVESTECH MODEL FUND PORTFOLIO CHANGE
With the InvesTech Negative Leadership Composite in neutral territory, we are actively seeking lower-risk profit opportunities. Value stocks continue to be attractive as they have exhibited strength to start the year, and they are relatively insulated from the overvaluation and concentration risk of the broader market. As a result, we are recommending the following change in the Model Fund Portfolio:
- Increase the T. Rowe Price Mid-Cap Value Mutual Fund (symbol: TRMCX) from 5% to 7%.
Following these changes, the net invested equity allocation of the Portfolio is 55%. This is comprised of 60% long positions, 5% in an inverse index ETF, 5% in an intermediate Treasury ETF, and 30% cash held in short-term Treasurys or a money market fund.
MACROECONOMIC UPDATE
- The Consumer Price Index (CPI) showed stalling inflation with the Overall CPI figure unchanged at a 2.7% yearly rate-of-change while the Core CPI rate, which excludes the volatile food and energy components, was also unchanged at 2.6%. While the absence of a reacceleration in inflation is promising, the lack of continued progress toward the Fed’s 2% target remains troubling.
- The Producer Price Index (PPI) was released for both October and November this week following delays related to the government shutdown late last year. It showed increasing price pressures with both Overall and Core PPI rising 3.0% year-over-year in November. Higher prices at the producer level are often passed down to consumers, meaning this increase could foreshadow higher prices for consumers in the coming months.
- The National Federation of Independent Business (NFIB) Small Business Optimism Index ticked up from 99.0 to 99.5 as owners expressed a decline in uncertainty and rising expectations for better business conditions. Following a year of record uncertainty, this is a promising development although plans to increase employment remain extremely depressed.
- Existing Home Sales rose 5.1% in December. However, home sales only increased 1.4% in all of 2025, marking an incredibly slow year for the housing market.
- The National Association of Home Builders (NAHB) Housing Market Index showed continued headwinds, falling from 39 to 37 as it remained below the threshold of 50 indicating pessimism among builders. It also revealed increasing challenges as 40% of builders reported price cuts while 65% used additional sales incentives.
TECHNICAL UPDATE
- InvesTech’s Gorilla Index declined nearly -3% this week as mega-cap momentum stocks continue to lose their footing. If this Index continues to fall, it would be a worrisome sign that the rest of the market could be in trouble.
- InvesTech’s Housing [Bubble] Bellwether Barometer experienced extreme volatility this week in response to various housing policy announcements. As the dust settles, it will be critical to watch this Barometer for further indications of weakness, as a definitive break in this area of the market could have wide reaching impacts on the economy.
Latest Issue of InvesTech Research Out Later Today
Inside this issue, we evaluate the biggest challenges facing the U.S. stock market and economy in 2026, reveal key profit opportunities for the year ahead, and expose how today’s extremes significantly raise the stakes for investors.
Listen to Jim on Friends Talk Money
Last week, InvesTech’s President and Founder, Jim Stack, joined nationally syndicated talk show host, Terry Savage, on Friends Talk Money along with retirement experts Richard Eisenberg and Pam Krueger. They discussed the potential of a black swan event, what history tells us about bubbles, and most importantly, how to manage risk by seeking out value and actively building defenses with a key focus on the benefit of a safety-first strategy in uncertain times. It is an insightful, fast-moving, and informative podcast that you don’t want to miss!
Watch the video podcast here.