December was a lovely month; a nice slow melt up. A lot of money was made. However, money flows into the stock market have just recently turned negative. This does not necessarily mean that we are in for a downturn, but it is highly likely we will see a marked increase in volatility. It may mean that investors may be taking some profits ahead of an election year with many potential market-moving events. There is also the distinct possibility that yesterday’s leaders lose their momentum status and revert to their mean growth rates.
Anticipating these changes, the Bull and his partners have rebalanced almost all accounts. This reduces the positions that have outperformed and invests more in laggards in each portfolio. We did this the first trading day of the New Year for liquidity and tax reasons. This will, hopefully, reduce the risk from stock leadership changes and provide improved performance from many value-oriented holdings. This shift has already been happening since August. If, in time, we need to do more, we will. This move is not an all or nothing move, but a modest shift.
We seek to manage risk as well as seek opportunity; stay steady, my friends.