AugurMax Asset Allocation Changes 2025-01-31
Equity exposure was pulled back after stock returns in January outperformed all other assets except commodities. Stocks remain the largest broad asset class and re-allocations at 2025-01-31 brought them more in line with their longer term average weighting. Bond exposures rose and are modestly above their long-term average weighting. The prescribed Currency exposure fell yet again and now represents a sizable short. This negative Currency exposure suggests the dollar will continue its rise versus foreign currencies. Commodity exposure was added to and Commodities are now well above their longer term average weighting.
Six regions experienced equity cutbacks with Australia and US Large Caps taking the brunt. Stock exposures were raised in the Euroland and the UK. The VIX exposure was unchanged and its negative weight indirectly implies an increase in equity exposure. Interest sensitive US REITs were also unchanged.
Bond exposures were raised in UK Gilts and in US High Yield. JGBs and US Investment Grade were cut the most. Cash exposure was unchanged.
Within Commodities, Gold and Corn were bumped up while NatGas and Oil exposures dropped.
Currencies have performed poorly recently and have NOT benefited from FED cuts and have been hurt by Trump2 tariff threats. A higher dollar makes foreign goods cheaper so any potential tariffs will be partially offset by a higher dollar. No currencies were added to and exposure to the Mexican Peso was cut. The risks within the broad currency exposure are balanced.
Domestic Stock returns were strong in January but were subject to big swings from the new regime’s policy changes as well as some surprising challenges to the AI paradigm. Moreover, most of the previous growth stock winners were spurned in favor of underperforming value stocks in Health Care and Materials. Bonds were mixed around the globe as geopolitical uncertainties held sway. US Tips beat US Treasuries hinting at higher inflation fears (see breakeven inflation rates). US Large Caps are more than 70% above their October 2022 lows (see worst drawdowns) with January’s rise adding to that recovery. The prescribed changes are largely influenced by our ECO methodology. Performance results (on a stand-alone basis) for assets like Gold and others using our ECO metrics are shown here.
