S&P at all time high .. Changing your Asset Allocation? More Bull run? Wait & see ?

[cyber888]

S&P at all time high .. Changing your Asset Allocation? More Bull run? Wait & see ?

So, equities continue to climb. Are you adding more stocks/equities in your portfolio, or are you taking off some from the table ? Anyone changing their asset allocation?

On one hand, the bulls are saying that there's still plenty of cash on the sideline, and the bull run will continue. The talking heads on Tv are saying the bear market ended, and seeing S&P at 3,600+ towards year end. That's like another 8-10%

On the other, the bears are saying that the market will wake up to the disconnect between the market and the economic situation.

But analysts are saying that all investors already know about this huge disconnect between the market and the economy, and there's really no other alternative but to park your money in equities as interest rates are near zero.

Care to share your AA or your plans to alter your AA ?

 

[MuirWannabe]

I’m waiting till after the election to do anything. Or maybe nothing. I’ve got more money on the sidelines than I’d like. But I’m not comfortable right now putting more in.

 

[audreyh1]

Well, if it gets high enough I suppose I’ll be rebalancing again.

 

[music-and-ski]

My recommendation is to sell those stocks high, and pick up some real estate in very nice places where white-collar people can work remotely using Zoom conference calls on their laptops or desktops. I do feel stocks are overvalued right now, and real-estate is supposed to be good against inflation, which may come quickly as a way to get out of the governments COVID deficit mess. But, office real-estate may crumble now that people realize they don't need offices, and houses that have value because of favourable commutes may tumble for the same reason. Rather than living in urban neighbourhoods and commuting to fancy offices, white collar people are going to want live in the prettiest, most pleasant places, whose values are driven by amenities (views, recreation, a music scene after COVID is beat, kids activities, etc.)

I already have 1/3 of my NW in such real estate. I'm now happy with this allocation, but not brave enough to go further into the same. I'm now recommending this AA to others, whereas before COVID I wouldn't.

For myself, if I was to shift my AA I believe the smart move would be to sell my primary residence, and buy a rental property in one of these sweet locations where the white-collar flight will end up. I'd leave my stocks alone.

 

[Dash man]

I lightened up my equity portfolio yesterday and am considering doing some more. If opportunity arises I’ll put some back in, but something isn’t right about this market and the economy.

 

[jimbee]

No, and I don't know why I would adjust my asset allocation based on the S&P 500. I'm sticking with my investment policy statement. My asset allocation is 50/50.

 

[steelyman]

I’ve changed the way I look at my allocation and view rebalancing triggers.

I slice my portfolio into 8 different pieces: 5 stock, 3 bond. They’re pretty typical: large cap, small/mid, developed int’l, etc. It wasn’t unusual for those pieces to move past the 5% band.

But if I view them at a higher level using just stock/bond, it’s much more stable and even though 2020 has had some wild swings, they never exceeded the allocation and still haven’t.

My higher level allocation (stock/bond) follows a Vanguard target date fund.

There’s still a way to go this year but right now, no rebalancing, no change.

 

[BigMoneyJim]

This market makes absolutely no sense to me right now, so I'm going to make my signature move: nothing.

Amazing how that has always worked out better than what I was thinking of doing.

 

[SecondCor521]

AA is 96/4. No plans to change at the moment.

No plans to change based on the election, nor the levels of any market index, nor what the talking heads say, nor interest rates, nor the price of any particular stock or market segment or sector.

The things that would make me change my asset allocation are:

1. Getting older and thus shortening my time horizon thus changing the historically maximally safe SWR AA might make me hold more bonds *if* I had a WR that was high enough for it to matter.

2. If I changed my goals, plans, or risk tolerance. This is unlikely, although I'm currently mulling over spending more money.

3. In the next bear market, whenever it comes, I'll probably go to 97/3 or 98/2, probably on the way down. Which of course is mostly psychological since the difference between those AAs is essentially zilch. But it'll give me something to do to feel mildly productive.

...

On earlier threads it seemed many here were convinced (and probably still are) that the market will drop again sometime soon and provide a buying opportunity. I wish them luck, but in general I don't think that "tactical AA" or "semi-DMT" tactics are a winning game in the long run, risk-adjusted, after taxes.

 

[Toocold]

60/40. Will balance if goes to 70/30. I check every quarter.

 

[donheff]

I made a decision before the pandemic to drift from 60/40 to 70/30. I bought a little about half way down and am now about 68/32. If the bull continues I will let it drift up past 70 to as far as 75 and then rebalance down. I still worry we will see a big drop, in which case I will buy back to 70, and possibly higher if the dip is severe enough that equities appear under valued by historic standards.

 

[VanWinkle]

No, and I don't know why I would adjust my asset allocation based on the S&P 500. I'm sticking with my investment policy statement. My asset allocation is 50/50.

+1 Same 50/50 here and following IPS which states re-balance in 5% bands

 

[Midpack]

Isn’t stimulus propping up the economy/market right now, forestalling the impact? Presumably that can’t continue indefinitely, and the other (economy/market) shoe will drop? And COVID is far from over in the US. I’m standing pat, but I wouldn’t increase my equity exposure now. YMMV

And the outlook wasn’t that great anyway. Instead of using debt to enhance productivity, too many corporations have been using it to buyback shares, that only increases returns while it lasts - then flat. Won’t be a robust recovery on the other side.

 

[sengsational]

I slice my portfolio into 8 different pieces: 5 stock, 3 bond. They’re pretty typical: large cap, small/mid, developed int’l, etc. It wasn’t unusual for those pieces to move past the 5% band.

I also have quite a few AA buckets. Just one US equity bucket, but I'm in individual countries with small percentages. So if I have a 3% bucket and a 10% band, then I'm hitting a trigger at 2.9% or 3.1%. I feel there was a lot of speculation going on in Honk Kong, Singapore etc, and those required rebalancing and they also seem to have provided a bit of a rebalancing divided, at least at this point in time. But as the wise folk here like to say, picking and sticking to asset allocation targets isn't about higher return, it's about stability.

 

[atmsmshr]

Isn’t stimulus propping up the economy/market right now, forestalling the impact? Presumably that can’t continue indefinitely, and the other (economy/market) shoe will drop? And COVID is far from over in the US. I’m standing pat, but I wouldn’t increase my equity exposure now. YMMV

+1

Also, bankruptcies and foreclosures take time to work through the system and hit the bottom line.

 

[vince]

Still can't get comfortable with current valuations of stocks. Have slowly, over the past couple of months, added to my cash bucket so I have four years' worth of spending. This includes two years worth of RMD. The rest of my AA remains at 50/50 and I will continue to rebalance it when need be.

 

[OldShooter]

... Care to share your AA or your plans to alter your AA ?

75/25 and no plans to change. JP Morgan's famous market forecast applies: "It will fluctuate."

 

[audreyh1]

75/25 and no plans to change. JP Morgan's famous market forecast applies: "It will fluctuate."

Is this your fixed AA in the sense that you rebalance to maintain the 75/25 ratio, or is it that you set aside a $X amount in fixed income, and put the rest in equities, and it happens to be 75/25 at the moment?

 

[Markola]

I’m not changing anything but I still enjoy respected experts’ opinions about the markets and the economy. Yesterday, Goldman Sachs’ head of US Equities research was a guest on the company’s podcast and he made a bullish case for the FAANG stocks to continue to outperform for the next few years, because they define the current economy and they are where everyone is spending most of their time. He said those are up 40% year to date while all the other stocks combined are down 2% for the year. He thinks the FAANGs will continue to drag the stock market up and have revised upwards their S&P 500 target to 3,600 for 2020. Amazing.

He expects low interest rates to persist indefinitely, making the yield of utilities stocks attractive. So, FAANG and utilities. Of course, what does he know but the Goldman Sachs peeps are rather sharp ones. YMMV.

https://www.goldmansachs.com/insights/podcasts/episodes/08-19-2020-david-kostin.html

 

[Lsbcal]

I’m not changing anything but I still enjoy respected experts’ opinions about the markets and the economy. Yesterday, Goldman Sachs’ head of US Equities research was a guest on the company’s podcast and he made a bullish case for the FAANG stocks to continue to outperform for the next few years, because they define the current economy and they are where everyone is spending most of their time. He said those are up 40% year to date while all the other stocks combined are down 2% for the year. He thinks the FAANGs will continue to drag the stock market up and have revised upwards their S&P 500 target to 3,600 for 2020. Amazing.

He expects low interest rates to persist indefinitely, making the yield of utilities stocks attractive. So, FAANG and utilities. Of course, what does he know but the Goldman Sachs peeps are rather sharp ones. YMMV.

https://www.goldmansachs.com/insights/podcasts/episodes/08-19-2020-david-kostin.html

I have a big helping of FAANG through the large cap growth fund VIGAX (or VUG as an etf) and also some through the sp500 fund (VFIAX). But I wouldn't hesitate to shift to value should that show a solid momentum shift over growth.

Will probably add to equities in October via a simple moving average approach mentioned in anther thread I started awhile ago. This would be to replace some bond money as I don't think bonds are very attractive going forward.

The hesitation to buy equities gives me some feeling that they will be more solid then people think. But I completely understand the worries.

 

[OldShooter]

Is this your fixed AA in the sense that you rebalance to maintain the 75/25 ratio, or is it that you set aside a $X amount in fixed income, and put the rest in equities, and it happens to be 75/25 at the moment?

Oh, its a little of both I guess. Two or three years ago we went from 60/40 to 75/25, which resulted in a rebalancing trade or two. The reason for the change was that we felt that the 25 would be adequate for our future needs and that the rest was long-term money going into testamentary trusts for son and grands, plus charity. As equities drifted up, sometime last year I did sell some to get back to 75/25. During the March excitement we did nothing, with the 25 starting to look a lot like a bucket. Had the market continued down or even just stayed down 20% we would have been planning to spend from the bucket and would not have rebalanced until the market came back.. Now, while doing nothing in the interim, we are back in the 75/26 range.

Buckets, spending needs, AA, etc. are all useful views IMO but none is suitable as a monotheistic religion.

 

[foxfirev5]

At a 40/60 AA with hopefully a rising equity allocation I do nothing. The 60% portion should get me to the end of the road.

 

[CyclingInvestor]

Staying at 100% individual equities, 27 years now. Never had any feelings as to where the market was headed.

 

[tdv2]

Right now I’m 59/41. Rebalanced in March on a 60/40 allocation. Recently sold some equities in taxable account as AA drifted up and outside my band in the market recovery. The only regret is having to pay taxes on the capital gains. Up until this point I had done all rebalancing in tax deferred accounts....sold some taxable equities to fund a big purchase. No plan to change AA just a plan to slowly deculumate and blow the dough.

 

[sgstaley]

This market makes absolutely no sense to me right now, so I'm going to make my signature move: nothing.

Amazing how that has always worked out better than what I was thinking of doing.

I would have to agree with you Big Money.