The US has decided to embark upon QE (Quantitative Easing) #3. Most experts agree this will have little effect on the jobless rate but in the short term will push up asset values, including many investment portfolio holdings. As a result, most asset classes are up or holding steady in the last month. Commodities, including gold, silver, and consumables which had shown some softness in the 3rd quarter ended with a jump on the news of QE3. However, this will be short term and is not founded on any underlying economic strength. The foundation for continuing upward momentum in equities is weak indeed. Tread lightly! So, here are the trade instructions for this month:
The Pro-Folio model evaluates its holdings on a monthly basis. There are no new trades this month. As of the last trading day of September (28st), we have the following trade signals:
SPY – HOLD
EFA – HOLD
IYR – HOLD
DJP – HOLD
IEF – HOLD
For existing investors:
You should have spent the month of September fully invested in the 5 holdings above, and you should keep it the same for October.
For new investors:
If you are new to Pro-Folio this month, you should divide your portfolio into 5 equal parts, and invest an equal amount of money in each of the securities shown above, marked as “HOLD” or “BUY.” Because you didn’t invest in the “HOLD” components of the model at the time when the buy signal first turned positive, your return on these initial trades may not be reflective of the model’s typical expected returns.
Global economics do not reflect the strong showing for many stock indexes around the world this year, particularly in the last few months. Analysts whom I follow are indicating that S&P 500 earnings forecasts are getting revised downward, which will put strong downward pressure on the US stock indices. For the portion of your portfolio that is not following Pro-Folio, I would suggest trimming your US and other equities to a very conservative position.
Fortunately for us, the Pro-Folio model has proven its worth over 37 years including the 2008 market crash, so we can continue to follow it precisely and expect that the value of our holdings will be preserved.