For the first time since 2011, the Commodity asset class finds itself among the top two spots of the Asset Class line up, causing US Equities/Stocks to slip back to its #3 spot it held for a mere 6 weeks — during 2/12-3/23 of this year.

Since 2/8/2016, Commodities have made an impressive rally from the #6 spot on the asset scale to #2. Quite a move in such a short period of time thanks to the extreme sell-off followed by a 50%+ retracement rally in Oil — the commodity most driving this change.  Precious Metals, namely Gold have contributed to the Commodity space, as well.

What is this signaling?

For starters, Domestic Equities slipping to #3 doesn’t mean that investors need to run for the hills and buy Gold and Bonds (the #1 and #2 asset classes) — as we learned in the short six week period this February/March when Stocks moved from #2 to #3.

NOTE: We already own a good bit of those. But, simply put, this is what I see:

  • Cash is below Stocks. FAVORABLE
  • The “Tally” spread between US Equities and Commodities — AKA the margin which Commodities has over Stocks is currently not significant.  Stocks could regain the more favorable #2 spot, yet again, in a short period of time. FAVORABLE
  • The margin amongst the top 4 asset classes is small; not much leadership or strength visa vie one another when we assess Bonds, Commodities, Stocks and Cash.  This usually means more of the same sideways markets until one of these asset classes increases its margin of favor by more than, say, 8%. NOT FAVORABLE

We’ve learned that the FOMC and Janet Yellen have opted to kick the interest rate hike can further down the road, and that may be indicative of the above asset scale; perhaps they are seeing an economy with several potential surprises amidst a cooling off of sorts: election year, China woes, Brexit, and slowing GDP– just to name a few.

In any event portfolios are slightly more conservative than positioned at the beginning of this quarter due to the above changes; slightly more bonds, cash and gold.  Again, however, we won’t be making any rash moves until we have further confirmation of a true leader among the asset classes. Questions about your allocation? We’d love to hear from you!

Expect our Mid-Year update, mid-July.

And remember, #we’vegotyoumanaged.