Re-balance Cycle Reminder All MyPlanIQ’s newsletters are archived here.

For regular SAA and TAA portfolios, the next re-balance will be on Monday, November 18, 2019. You can also find the re-balance calendar for 2019 on ‘Dashboard‘ page once you log in.

As a reminder to expert users: advanced portfolios are still re-balanced based on their original re-balance schedules and they are not the same as those used in Strategic and Tactical Asset Allocation (SAA and TAA) portfolios of a plan.

Please note that we now list the next re-balance date on every portfolio page.

Market Indicator And Momentum

Since our inception in 2008, MyPlanIQ has featured and monitored various momentum based strategies. Specifically, our Advanced Strategies page has listed some of these representative portfolios. Periodically we reviewed momentum based strategies at various levels including industries, sectors and assets. For example, see August 20, 2018: How Momentum Investing Stacks Up?

It was relatively new when we first systematically introduced momentum based investing. Since then, it has become more widely accepted, as evidenced by the momentum factor individual stock level ETFs (see, for example, September 9, 2019: Momentum Factor Stock ETFs). We are pleased to see that this method has become a viable mainstream investing strategy choice. 

Momentum across fixed income, cash and stocks

Traditionally, momentum based portfolios are based on relative momentum: i.e. picking stocks or funds with the highest momentum scores to invest. In MyPlanIQ portfolios that are listed on Advanced Strategies, however, we added ‘safe’ bond funds (and cash) to the candidate list so that when these bond funds or cash have greatest momentum scores, a portfolio will invest in these ‘safe’ funds instead. 

For example, P Momentum Scoring Style ETFs and Treasuries will invest into Treasury bond fund IEF or so when other stock style ETFs such as IWM have lower momentum scores. Doing so, we are able to avoid large loss when all of these stock funds falter. 

Similarly, in P Goldman Sachs Global Tactical Include Emerging Market Diversified Bonds, we have a spectrum of bond funds to help to mitigate risk asset risk (US stocks, US REITs, International stocks, Emerging market stocks, and commodities). 

Unfortunately, based on our past experience, we now have learned that simply relying on relative momentum between fixed income (bonds and cash) and risk assets to mitigate risk has several drawbacks. In particular, strong fixed income (bonds) performance does not necessarily translate into weakness in stocks. In fact, in the past decade or longer, we have seen several occasions when bonds were outperforming while stocks just experienced some temporary setback. The ultra low interest rate policies adopted by central banks across the world have exacerbated this. Given current global economic weakness and trade conflict, it seems that this type of monetary stimulation with lower interest rates will last for sometime in the future. 

Market indicator for risk asset trends

In general, it’s been widely known that risk assets (specifically stocks) will have a high probability to experience a downtrend when:

  • General stock market indices such as S&P 500 index are in a downtrend
  • Increased credit risk such as widening spread between the yields of treasury bonds and high yield bonds
  • Market internals such as stocks in various sectors are all converging into a downtrend
  • Market valuation

A simple but effective indicator, for example, is the 200 days simple moving average on a broad stock market index such as S&P 500 index. The other way is to use long term market valuation as a guideline. We have both types of portfolios listed on  Advanced Strategies. Incorporating other factors can further improve the effectiveness. 

We have developed a market composite indicator that incorporates the above factors. In the following, we show several results. 

Buy VFINX (S&P 500) when market indicator indicates an uptrend. Otherwise, switch to VFITX (Vanguard Intermediate Term Treasury Bond fund):

as of 11/8/2019:
Ticker/Portfolio Name Max DD 1Yr AR 3Yr AR 5Yr AR 10Yr AR 15Yr AR Since 12/31/96
P Market Composite VFINX VFITX As Cash 19.6% 12.3% 15.2% 10.4% 13.2% 11.9% 12.8%
VFINX (Vanguard 500 Index Investor) 55,3% 13.1% 14.6% 10.7% 13.1% 8.8% 8.4%

Max DD: Maximum Drawdown  

Composite momentum at various levels

Composite Momentum Portfolios (as of 11/8/2019):
Ticker/Portfolio Name Max DD 1Yr AR 3Yr AR 5Yr AR 10Yr AR 15Yr AR Since Inception*
P Composite Momentum Scoring Global Risk Assets Top 2 VFITX As Cash Monthly 20.7% 15.2% 14.6% 8.8% 11.6% 14.0% 14.9% (12/31/96)
P Goldman Sachs Global Tactical Include Emerging Market Diversified Bonds 17.2% -1.5% 5.8% 4.4% 7.5% 10.2% 11.7%(12/31/96)
P Composite Momentum Scoring Factor ETFs Top 1 VFITX As Cash Monthly 20.3% 9.2% 16.5% 10.3% 14.6%   13.3% (1/1/2008)
P Composite Momentum Scoring Style ETFs VFITX As Cash Monthly 22.8% 11.1% 14.6% 9.4% 13.6% 12.3% 12.2% (1/1/2001)
P Momentum Scoring Style ETFs and Treasuries 23.3% -7.0% 6.8% 1.8% 7.0% 8.2%  7.9% (1/1/2001)
P Composite Fidelity Select Rotation VFITX As Cash Monthly 43.7% -7.4% 7.6% 9.9% 13.2% 15.8% 17.4% (12/31/96) 
P Sector Rotation Fidelity Select Funds Top 2 Monthly Adjust with Cash 53.1% -9.9% 6.2% 9.4% 11.5% 12.9% 16.7% (12/31/96) 
VFINX (Vanguard 500 Index Investor) 55.3% 13.1% 14.6% 10.7% 13.1% 8.8%  8.4% (12/31/96)

Year to year detailed info >>


In the following weeks, we will gradually release these portfolios and the next version of service to our users. 

Market overview

US companies continued to beat their lowered earnings expectation: as of Last Friday, FactSet shows that the blended earnings decline is now -2.4%, again better than -2.7% two weeks ago. However, with 89% of S&P 500 companies already reporting, it’s very likely the Q3 earnings will be actually another (the third consecutive) quarter year-over-year earnings decline. Nevertheless, investors seem to look for a brighter side, figuring that now that the worst is over, earnings next year will improve more. 

Regardless, with many geopolitical and trade uncertainties and the high stock valuation, we don’t think it’s a solid investment environment at all. Again, stay the course that’s consistent with your personal risk tolerance. 

For more detailed asset trend scores, please refer to 360° Market Overview

In terms of investments, even after the recent retreat, U.S. stock valuation is still at a historically high level and a bigger correction is still waiting to happen. It is thus not a good time to take excessive risk. However, we remain optimistic about U.S. economy in the long term and believe much better investment opportunities will arise in the future. 

We again would like to stress for any new investor and new money, the best way to step into this kind of markets is through dollar cost average (DCA), i.e. invest and/or follow a model portfolio in several phases (such as 2 or 3 months) instead of the whole sum at one shot. 

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