Rudi’s View: To Sell Or Not To Sell

Rudi's View | Mar 06 2025

By Rudi Filapek-Vandyck, Editor

Within the space of a number of weeks only, the prospect of further gains for US equities looks quite remote, as the early euphoria from Trump's election victory has quickly evaporated.

There are still voices in the market who believe the 'tough guy' President will flinch first if/when the current draw down threatens to descend into a much bigger black hole for share markets, but who knows, really?

The FNArena-Vested Equities All-Weather Model Portfolio has lifted its allocation to cash to circa 15% in addition to some 7% exposure to gold.

Elsewhere, we note some portfolios have moved to 80% in cash, while pondering whether 100% is more appropriate for the uncertainty ahead.

The All-Weather Portfolio had moved to 40%-plus in cash back in 2022, when a global reset in bond yields worked as a sledgehammer on valuations for Quality and Growth stocks. We'll do it again, and possibly more, if we are convinced a new GFC-like bear market is waiting to descend upon financial markets, but we are not yet convinced of that.

There is definitely a possibility for times to remain rough and tough for quite a while. From the Asian currency crisis, Y2K, the GFC, covid and the global bond reset; the past few decades have seen plenty of issues arising that weighed on markets for many, many months. Think also Grexit and EU-related problems.

This might well be one of such times. We don't know for certain yet.

As far as my own experiences go, such times are ideal for upgrading and re-calibrating the investment portfolio. Throw out the misfits, the disappointments, the keep-my-fingers-crossed-it-won't-get-worse Hail Marys, and the higher risk, small cap possibilities for a future ten bagger.

Instead, it is time to start researching those Higher Quality stalwarts you always thought were too expensively priced to buy. If the current trend remains ongoing, you'll soon be able to purchase them at much cheaper levels. This is the true gift that share markets present when risk off dominates the global landscape.

From personal experience, I can also confirm it does wonders to one's mindset. Of course, the value of the portfolio still goes down with every day of weakening share prices, but you'll be surprised how much of a difference it makes to one's mindset to have cash available for whenever the right opportunity comes along.

To the trained eye, the February result season would have provided plenty of such examples. I intend to elaborate more on this in Monday's follow-up edition of Weekly Insights.

There remains, of course, my personal research into All-Weather Performers, including some of the smaller cap companies I believe still have a long runway of growth ahead with higher quality attributes than most of their peers.

Some changes have been made to the selections available on the dedicated section of the website:

Have been removed: APA Group ((APA)), IDP Education ((IEL)), Integral Diagnostics ((IDX)), and Redox ((RDX)) -- not all from the same selections.

Have been added: Sigma Healthcare ((SIG)) and Pinnacle Investment Managers ((PNI)).

I intend to elaborate more on these changes in Monday's Weekly Insights. (See also further below).

https://fnarena.com/index.php/analysis-data/all-weather-stocks/

Longview Stays Equities Neutral

Longview Economics removed its portfolio Equities Overweight recommendation in early February as more and more technical Sell signals accumulated but Chief Market Strategist Chris Watling had already concluded late last year the US bull market looked tired and exhausted.

Longview's most recent strategy update, released this week, has stuck with a Neutral equities exposure alongside an Overweight allocation for US Treasuries and Underweight Cash.

It is Watling's observation that more and more signals are pointing towards slowing economic momentum for the US economy, while Trump's tariffs add more negative pressure, but US equities are also -6% off their recent all-time peak, and weakening daily.

Under different circumstances, reports Watling, one might be inclined to start considering a more constructive view on the markets, but not this time. Longview Economics is anticipating a relief rally of some sorts shortly, but weakness should resume soon after.

It is Longview's assessment equity markets might be staring at multiple weeks of weakness, potentially morphing into multiple months in case of a worse outcome. Tactically Cautious is the main theme. But also: Neutral, not Sell.

Incidentally, Franklin Templeton sent out a press statement this week in which Fixed Income CIO Sonal Desai argues taking a too pessimistic view on the trajectory ahead seems "premature" at this stage, with the US economy, despite everything, still expected to grow above potential in 2025.