INVESTECH MODEL FUND PORTFOLIO CHANGE
As we discussed in last week’s Market Letter, Van Eck Vectors Gold Miners ETF (Symbol: GDX) grew its share in the Model Fund Portfolio to 7% following a year of strong performance. This week, gold showed signs of volatility, so it is prudent to take some profits off the table. We recommend you take at least 2% of the GDX position to lock in profits.
- Decrease the Van Eck Vectors Gold Miners ETF (Symbol: GDX) from 7% to 5%. We are taking advantage of the opportunity to secure gains while still maintaining a position in this defensive hedge.
The Model Fund Portfolio is now 55% invested in quality equity ETFs, 5% in an intermediate Treasury ETF, and 40% cash. The cash portion of the Portfolio (40%) is held in short-term Treasurys or a money market fund to provide an attractive yield and defensive buffer.
MACROECONOMIC UPDATE
- Existing Home Sales ticked up by 1.5% in September while inventory also increased 1.3% and 14% year-over-year. Despite this slight increase in sales, the median time on the market for properties increased from 31 days to 33 days. This is a sign that even with slightly lower mortgage rates the housing market is still unable to gain momentum.
- Consumer Sentiment from the University of Michigan dropped 1.5 points to 53.6 as consumers’ evaluations of the present and their expectations for the future slipped. This is one of the lowest readings on record, indicating that consumers continue to be pessimistic about their personal financial situations.
- The Consumer Price Index (CPI) came in cooler than expected, rising 3% year-over-year, up from 2.9%. The Core CPI rate, which excludes the volatile food and energy components, also came in at 3% year-over-year in a slight decrease from 3.1% last month. Read our latest Market Insight for more on this key release.
TECHNICAL UPDATE
- Our Housing [Bubble] Bellwether Barometer rose slightly this week but remains dangerously close to its first critical support level. The Barometer is also still more than -20% below its peak from over a year ago, signaling that the slowdown in the housing market is likely far from over.
- Margin Debt increased by 6.3% in its latest release, rocketing up to $1.13 trillion. The rise lifted the Margin Debt Carry Load as a % of GDP, which takes borrowing costs into account, up to a new all-time high as speculation continues to run rampant. This vital warning reminds us that this is NOT a low risk investing environment. See our updated Market Insight for more information on this indicator.