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

Regular AAC (Asset Allocation Composite), SAA and TAA portfolios are always rebalanced on the first trading day of a month. the next re-balance will be on Monday August 1, 2023. 

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.

Trends, Factors & Indicators

As we have reached the midpoint of 2023, it is an opportune moment to evaluate asset trends, economic indicators, and significant stock factors. Additionally, we will delve into our insights and projections for the second half of the year.

Major asset trends

The following table shows the trend scores for major asset classes at the end of June: 

Description Symbol 13 Weeks 26 Weeks 52 Weeks Trend Score
US Stocks VTI 8.76% 17.04% 19.57% 10.44%
International Developed Stks VEA 4.15% 12.93% 19.39% 8.19%
Emerging Mkt Bonds PCY 5.23% 11.6% 18.51% 8.03%
US High Yield Bonds JNK 2.39% 7.89% 14.37% 5.32%
Treasury Bills SHV 2.29% 4.07% 6.53% 2.68%
US Equity REITs VNQ 1.76% 4.5% -2.29% 2.51%
Emerging Market Stks VWO 1.24% 5.0% 1.84% 2.15%
US Credit Bonds IGIB 0.49% 5.32% 4.56% 2.14%
Municipal Bonds MUB 0.35% 3.35% 4.69% 1.78%
Gold GLD -2.7% 5.09% 5.91% 1.36%
Total US Bonds BND -0.06% 3.67% 1.0% 0.9%
Mortgage Back Bonds MBB 0.1% 3.31% 0.39% 0.66%
International Treasury Bonds BWX -1.69% 1.87% -0.43% 0.03%
Intermediate Treasuries IEF -1.21% 3.1% -1.92% -0.26%
International REITs RWX -2.29% -3.22% -5.07% -2.15%
Commodities DBC -4.38% -7.91% -14.21% -5.48%

We have included a detailed list in the above as it shows some of interesting developments:

  1. The winning streak of US stocks continues, consistently outperforming other assets for over a decade since 2010. This implies that portfolios with a focus on US stocks have surpassed diversified allocation portfolios. Popular indexes like the S&P 500 (SPY) or the total US stock index (VTI) have set the benchmark, highlighting the underperformance of other portfolio types.

  2. Treasury Bills (SHV), a proxy of Cash,  stands out with a higher trend score compared to other major assets such as Emerging market stocks (VWO), REITs (VNQ), Bonds (BND, IGIB, MUB), and Gold (GLD). Cash is no longer considered insignificant. With a yield exceeding 5%, it has become a viable asset option, even competing against highly overvalued top-performing US stocks.

  3. Commodities (DBC) exhibit their characteristic volatility, ranking at the bottom. The chart indicates that commodities have not reliably served as a hedge or diversifier since 2007.

Upon examining the chart above, it becomes evident that since 2007 (the inception of VEA), both international stocks (VEA) and emerging market stocks (VWO) have displayed inferior performance compared to all other US assets, including US bonds (BND). This further emphasizes the point made earlier: global allocation portfolios have struggled to match the returns of US assets, with foreign stocks acting as a drag on portfolio performance.

Nevertheless, despite their underperformance, we maintain the belief that foreign stocks can still serve as an effective diversification tool for portfolios. Their current undervaluation suggests the potential for future appreciation, offering an opportunity for investors.

Styles & factors

Once more, we observe that within US stocks, large cap and growth stocks are demonstrating superior performance compared to small cap and value stocks. This consistent trend, interrupted briefly last year, has now resurfaced.

US Equity Trend Scores

Description Symbol 13 Weeks 26 Weeks 52 Weeks Trend Score
Russell Largecap Growth IWF 12.96% 29.11% 26.46% 15.01%
Russell Midcap Growth IWP 6.34% 16.0% 21.92% 10.55%
Russell Largecap Index IWB 8.8% 16.85% 19.26% 10.35%
Russell Smallcap Growth IWO 7.3% 13.69% 18.44% 9.44%
Russell Midcap Indedx IWR 5.01% 9.29% 14.65% 7.63%
Russell Smallcap Index IWM 5.55% 8.39% 12.44% 6.71%
Russell Midcap Value IWS 4.19% 5.55% 10.45% 5.91%
Russell Largecap Value IWD 4.52% 5.48% 11.85% 5.79%
Russell Smallcap Value IWN 3.68% 2.99% 6.24% 3.94%

The resurgence of growth stocks suggests that investors are leaning to a more favorable interest rate environment view, anticipating a return to low interest rates amidst slowing inflation.

When considering smart factors such as momentum, value, quality, size, and minimum volatility, it becomes apparent that quality stocks hold the highest rank, while value and size factors are experiencing relatively lower performance:

Description Symbol 13 Weeks 26 Weeks 52 Weeks Trend Score
Large Cap  SPY 9.09% 17.23% 19.67% 10.53%
Momentum MTUM 4.57% 0.23% 10.5% 4.55%
Value VTV 4.26% 3.86% 12.59% 5.44%
Quality QUAL 9.35% 19.42% 23.87% 11.81%
Minimum Volatility USMV 2.99% 4.38% 8.46% 4.25%
Small Cap IWM 5.55% 8.39% 12.44% 6.71%

If we examine the top 10 holdings of QUAL closely:

Five of these stocks are technology stocks: NVDA, AAPL, MSFT, META, and AVGO. Out of the top 10 stocks, six of them, namely NVDA, AAPL, V, MSFT, MA, and AVGO, have reached record highs. It is unsurprising to witness these tech stocks being regarded as quality stocks since their products have become deeply ingrained in every facet of our economy. It is difficult to refute the notion that technology businesses are emerging as dominant forces in the economy.

Economy indicators

MyPlanIQ’s Asset Allocation Composite (AAC) and Tactical Asset Allocation (TAA) both rely on a combination of trend scores and some key economy indicators to gauge major risk asset up or down trends (see this for more discussions). Economy indicators play an important role in our asset allocation strategies. 

So far, key economy indicators are indicating a slowing economy. The key question is how slow it is. 

  • Unemployment rate: the May’s US unemployment rate rose above its previous value a year ago (3.7% vs. 3.6%), even though the rise has been slow, indicating a still hot job market:

Notice unemployment rate is a lagging indicator, meaning it was usually strong even when a recession already started.

  • Retail sales: this too shows a decline from a year ago. 

Similar to job situation, retail sales (representing consumption) has somewhat weakened, though not by a significant margin. 

  • Housing start: however housing has recovered strongly, sending a conflicting signal: 

The rising mortgage rates had a very significant impact on housing in last year but it has started to recover in May. 

  • Inflation (CPI): CPI, the main gauge of inflation, has been trending down rapidly:

In summary, inflation and employment data remain positive, although there has been a slight decline in consumption. Nevertheless, housing starts are exhibiting a robust recovery, which poses a challenge for central banks in managing inflation. Currently, a recession is not on the immediate horizon, but it is not completely out of consideration.


This year is one of those instances where the saying ‘sell in May and go away’ has not manifested itself — though it is important to note that summer has only just commenced, making it premature to draw definitive conclusions. Since the end of May, the S&P 500 index has displayed exceptional strength, failing to trigger the MACD sell signal utilized in our seasonal tracking portfolio STS Seasonal Timing Using VFINX Total Return Bond Fund As Cash

Market overview

Now the second quarter has ended, investors will start to get a better picture on how earnings will be. Factset estimates that in Q2 S&P 500 companies earnings declined 6.8%. This compares with Q1’s earnings decline 2.1%. At the moment, S&P 500 index has surpassed its previous 52 week highs. 

As always, we call for staying the course which is guided by the well defined and sound strategic and tactical strategies:

  • For strategic allocation (buy and hold) investors, ignore the current market behavior. Remember, as what we have emphasized numerous times, when you choose and commit to a strategic portfolio, you essentially know and commit that your investment horizon (or the time you need to utilize this capital) is 20 years or preferably much longer given the current high valuation. As we pointed out, if your investments are those diversified (index) funds such as an S&P 500 index fund (VFINX, for example), you know your money is in some solid ‘business’ that eventually (20 years later and preferably many more years later) will deliver some reasonable returns. As long as you are comfortable with this thesis, you should sit tight and forget about the current gyration.
  • For tactical investors, again, you have to ignore the current market noise. Furthermore, you should follow your strategy rigorously, especially in a time like this. Human emotion, both optimistic and pessimistic, and human desire, both greedy and fearful, are your worst enemies. This has been shown to be true time and time again.

Stock valuation has dropped and now valuation is becoming less hostile. However, it is still not cheap by historical standard. For the moment, we believe it’s prudent to be extra cautious. However how serious a correction might be, we have confidence in the US economy in the long term and thus in the stocks in aggregate. We just need to manage through interim losses carefully.

We again would like to emphasize that 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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