The November 25 Dashboard: Our 3 Layers of Risk Management

Stringer Asset Management's latest outlook indicates its proprietary Cash Indicator reflects relatively healthy financial markets and anticipates normal volatility, contrasting with last year's complacency. Strategically, the firm favors U.S. equities due to innovation and strong fundamentals, finding attractive valuations outside of high-fliers, and views high-quality fixed income as attractive given current rates and anticipated Fed rate reductions later this year. Tactically, they have increased domestic equity exposure, including industrial and global financials ETFs, anticipating continued U.S. economic growth despite slowing job figures, with the U.S. expected to lead global expansion.

Analysis

Stringer Asset Management's proprietary Cash Indicator (CI) has steadied, reflecting relatively healthy financial markets and forecasting normal volatility, a significant shift from last year's low levels indicating excessive complacency. This moderately positive signal suggests a more balanced market environment, even as the S&P 500 is perceived as somewhat expensive.

The firm maintains an optimistic strategic view on U.S. equities, expecting them to lead global markets due to innovation and strong fundamentals, while actively seeking attractive valuations in quality businesses outside of high-fliers. Tactically, they have increased overall equity exposure, including an industrial sector ETF and global financials, to leverage anticipated corporate revenue and earnings growth.

High-quality fixed income is considered attractive at current interest rates, with the firm anticipating a gradual reduction in short-term rates by the Federal Reserve later this year, creating opportunities in investment-grade corporate bonds. This positioning aligns with expectations for continued healthy U.S. economic growth, despite slowing job figures, which is projected to support household income and corporate performance.

Key Decisions for Investors

• Investors should consider increasing exposure to quality U.S. equities, particularly in sectors like industrials and global financials, focusing on companies with consistent earnings.
• Evaluate opportunities in high-quality, intermediate-term investment-grade corporate bonds and asset-backed securities to capitalize on current attractive yields before anticipated Fed rate reductions.
• Monitor key economic indicators such as U.S. job growth and corporate earnings for confirmation of the healthy economic expansion and its potential impact on market volatility and sector performance.