AugurMax Asset Allocation Changes 2024-08-31
Equity exposure was pushed down for a fourth month after August returns showed a mixed picture around the globe. Stocks are no longer the largest broad asset class and re-allocations at month-end brought them well below their longer term average weighting. Bond exposures rose and are above their long-term average weighting. Currencies were cut in half but remain a long. A positive Currency exposure suggests that the dollar will weaken vis-a-vis foreign currencies. Commodity exposure was essentially unchanged. Commodities are marginally below their longer term average weighting.
The UK, US Large Caps, and US Small Caps were the only equity regions receiving additional exposure — all other equities were cut. Emerging Markets stocks were cut back the most along with stocks in the Euroland and Japan. The VIX exposure was unchanged so its positive weight implies a decrease in equity exposure. US REITs were added to in a big way.
Bond exposures were raised across the board except in the Euroland and Japan where they fell. Ten Year Treasuries and Emerging Market bonds were raised the most. Cash exposure fell slightly.
Commodities moved down and reductions were concentrated in Gold and Corn. Oil exposure rose considerably.
The positive Currency exposure (indirectly) implies that rates in the US will be lower versus rates in the global market in the short term. The Swiss Franc was added to the most while exposure to the GB Pound was cut. The Swiss Franc exposure is now the largest while the Mexican Peso is the smallest.
Stocks in August were mixed as early month volatility rattled international markets. Ultimately, Energy and Retail stocks were spurned in favor of safer Utilities, REITs, and Consumer Staples. Bonds rose in all regions. US Tips underperformed US Treasuries again implying a shift from inflationary fears to concerns over lower growth (see breakeven inflation rates). US Large Caps are now 57% above their October 2022 lows (see worst drawdowns) with August’s gain contributing 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.
