Asset Allocations

AugurMax Asset Allocation Changes 2023-01-31

Equity exposure was reduced at month-end as risky assets surged in January.  Stocks still represent the largest broad asset class.  Bond exposures were added to dramatically and went from a short to a long.  Most of the cuts in Equities went to BondsCommodities, also a short, were cut even more.  Equity exposure remains more in line with its long term average weighting while bonds are also back in line with their longer term average. 

Equity increases were concentrated in Australia and US Small Caps.  US Large Cap and Canada stocks were throttled back.  The VIX exposure was added to such that it now has a zero weight and essentially cuts its risk-on (short) bet.  US REITs were bumped up considerably.

Additional Bond exposures were concentrated in Tips, US Investment Grade Bonds, US High Yield, and Emerging Markets. Cash exposure was trimmed. 

Commodities fell for a fourth month with NatGas especially hard hit.  Only a few minor changes were prescribed for the four commodities at month-end.

Aggregate Currency exposure was cut substantially and now represents a (minor) short.  The Aussie Dollar and Mexican Peso exposures were cut the most.  In aggregate, these moves remove the large bets against the US dollar.

With expectations that inflation may be in the rear mirror and a soft landing might be possible, US equities rallied in January after a down December.  The moves off the trough on October 12th (see worst drawdowns) continue.  Historically, the speed (number of days to trough) in which the market drops is highly correlated with the speed of the recovery.  In looking back decades, the January — October drop was quite fast.  At January month-end, a more normal Equity exposure prescribed here combined with a small Cash position points to a mildly bullish portfolio hedged somewhat moving forward.  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.



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