The big news of the week, of course, happened a few hours ago when LeBron James announced that he was taking his talents back to Cleveland. Now that the most important event in sports has been decided, we can examine the financial markets, which are not as clearly defined as the future of the King of Basketball.
This was a week when the high valuation of virtually everything has been examined and analyzed. In his 7/7 article in The New York Times, Neil Irwin writes Welcome to the Everything Boom, or Maybe the Everything Bubble. Nearly every market and every asset class is highly valued according to historical standards.
What does that mean for an investor today?
Writing his first LinkedIn blog post (LinkedIn recently allowed select members to post “long form” stories) CMG Chief Investment Officer Steve Blumenthal writes Forward P/E is Poor Investment Valuation Tool. Writes Steve: “Tread carefully with your stock exposure. Up exposure to tactical strategies and allocate to equity funds that incorporate some form of downside “tail risk” loss protection.”
In the 7/11 On My Radar titled A Debt Trap, Blumenthal says “when the market is expensively priced, forward potential return is lower and risk considerably higher.” What can you do?
Disciplined tactical strategies seek to position in line with market leadership. They have the flexibility to move to safer asset classes when leadership points in that direction. When risk is high in equities, tilt your weightings and overweight tactical. When a crash does materialize you may be in a far better position to take advantage of the outstanding opportunity that the decline will bring. When risk is low, tilt back to overweight equities.
Have a great summer weekend!