There are no trades for February. Fundamentals remain the same. As I stated last month: “The global fundamentals haven’t changed for a couple of months. It seems the US stock market is fueled by a slow but continuing economic recovery and bullish sentiment, but not much else. There is a lot of risk here, but for now the model is sticking with this position.”
The S&P 500 ended January lower than it started, indicating some softening of the sentiment here. However as many have pointed out, a “down” January is followed by an “up” year 75% of the time, historically. For the last few weeks so far, the index has tested the waters under $200 to the downside, but has always found support before hitting our sell marker – the 10-month moving average.
The Swiss pulled a shocker this month with their unexpected withdrawal from the Swiss Franc peg to the Euro. The Swiss Franc immediately appreciated as much as 20%, which was bad news for the many individuals and companies in Europe holding obligations (such as mortgages) that are denominated in Swiss Francs. Yesterday your mortgage payment was 100 Euros a month, but today it is 120 Euros a month because your payment is due in Swiss Francs and now those Francs are worth a lot more of the Euros that you receive for your salary. No fun for these people, right?
It is interesting to note that this move isn’t good for the Swiss economy, either. Much of the economy comes from exports – and these goods just got 20% more expensive for the rest of the world. So what is going to happen? Around the world, people are going to buy less stuff from Switzerland – simple supply and demand. Price goes up, demand goes down.
The Pro-Folio USA model evaluates its holdings on a monthly basis. There are no trades this month. As of the last trading day of January (30th), we have the following trade signals:
For existing investors:
You should have spent the month of January invested in the holdings above that are marked HOLD or BUY. You should be keeping the cash equivalent of the other 2 positions on the sideline, ready to invest when those segment signals turn positive.
For new investors:
If you are new to Pro-Folio USA 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.
I continue to observe the mess in Europe with fascination. With economic growth stagnating, and the ECB (European Central Bank) getting ready to stimulate the heck out of the money supply, I see little evidence that any country in the Eurozone is going to be able to grow its way out of its debt obligations. Greece is pulling an interesting trick with their threats to default on their national debt, and as I noted Switzerland pulled its own trick a couple of weeks back. These are uncertain times and the value of EFA, which is heavy in European stocks, reflects that uncertainty.
Fortunately for us, the Pro-Folio USA model lost less than 1% of value in 2008, the worst year in recent memory and the only year on record that Pro-Folio USA lost value. As shown in the 2014 performance numbers that I posted recently, the long term average growth of the model is north of 8% per year. We can continue to follow the model with confidence that our assets will be protected. Sleep well every night!
If you want to get the PDF booklet showing you how to implement the Pro-Folio USA trading model on your own, click here.
If you want to learn more about the Pro-Folio Global upgrade portfolio, click here.
We are heading into the month of January. I hope each of you had the opportunity to enjoy some time off recently, and I wish you joy and prosperity for 2015!
Dear reader, thank you for your interest in Pro-Folio.