Numbness as a Strategy - February Allocation
Allocation Percentages for February 2023
F Fund
0%
C Fund
0%
S Fund
0%
I Fund
100%
Welcome to February! I think everyone can be pleased with the performance of the markets this month. Many bears are a bit worried about the current rally and are positioned in such a manner to have margin calls should it continue. While this may seem like a win for the bulls, months with rallies like this are often followed by months of flat or negative returns. Causing further concern is a possible double dip recession. Remember, we are in a recovery from a 2-quarter recession last year. The economy is still on shaky ground as it attempts to deal with high inflation. Consumers will note that while CPI inflation has tempered somewhat, their increased consumer debt interest rates have not subsided. Higher interest coupled with the bad buying habits of 3 years of living with “free money” could potentially wreak havoc on the consumer-driven economy. Yes, inflation is low, but massive company layoffs are occurring, but for now, they remain confined to the tech sector. I’m not a bear, but it is only prudent to analyze weaknesses in systems when unforeseen inputs have been entered into the machinery.
Ironically, I think I have some good things to say about the Russo-Ukraine war when it comes to the economy and the markets. We have been living with this conflict now for 11 months. The world has had time to adjust to the impact on supply chains, the increase in energy prices, and the daily rhetoric. As a world, we are becoming numb to the conflict. Provided there are no serious spillovers into NATO, or other unforeseen escalations or impacts to supply chains, a cautious return to normal should occur. As a result of this numbness, market makers, analysts, traders, and most importantly companies, can be back to the business of running their companies and forecasting growth and demand.
As a result of the acceptance and expectation of the new reality with the impacts of the Russo-Ukraine war, the international markets still seem poised to continue to recover faster than the US markets which are still suffering from the issues I listed above. Therefore, despite the strong performance of the small caps and the S&P500, I’m still remaining 100% in the I Fund. Keep investing!
