Two additional strategy changes

Genevieve Signoret

Letter from the President

Last week I announced here a strategy change: we’re replacing small for large cap stocks in our short-term model portfolio. Today I announce two additional strategy changes:

  1. For clients investing in pesos, we’re focusing transitory buckets on Swiss and Asia ex-Japan equity, ridding them of Mexico and UK stocks.
  2. We’re buying small cap U.S. equity in our medium-term model portfolio.

In both cases, we’re acting to ride on current momentum.

New transitory budgets

All of our peso-based clients—clients whose brokerage houses are in Mexico—have increased their accounts with us in the past six months, a period during which the peso has been falling or weak. Last 15 December 2014, we wrote here that, to avoid purchasing U.S.-dollar–denominated equity with the dollar trading at such a high premium, we were putting all new peso investment capital into what we called “transitory buckets”: temporary portfolios allocated to Mexico, UK, Switzerland, and Asia ex-Japan stock markets. We are now revising these allocations.

We’re closing out our Mexico and UK equity positions to leave these buckets split half and half between the Swiss and Asia ex-Japan stock markets. This way we seize on the strong positive momentum on display in U.S. dollar terms in these markets and eliminate the drag from the UK and Mexico equity.

In our original 15 December 2015, we explain how we intend to eventually transition this new capital into our normal strategies, which these days are strongly tilted toward the U.S. dollar.

Revised medium-term bucket

In our medium-term (2-5-year) portfolios, because small cap U.S. equity is showing stronger upward momentum than is large cap, we’re shifting from large to small cap.

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