August 2020 | Portfolio Update

Dear Spartan Client,

Below are the main asset classes utilized in Spartan portfolios and their model-driven exposure heading into August.

At a Glance: Allocation Adjustments heading into August, 2020

  • U.S. Equities: Remain in uptrends across intermediate and long term. Decreasing allocation as exposure is handed back to International Equities.

  • International Equities: Increasing exposure due to return of long-term uptrends for both Foreign Developed and Emerging Markets.

  • Real Estate: No change to the minimum allocation due to continued downtrends in all time frames.

  • Intermediate-Term Fixed Income: No change from last month and remains in uptrends across all time frames for U.S. and International Bonds.

  • TIPS: No change to exposure with uptrends remaining across all time frames.

  • Short-Term Notes and Cash Equivalents: Decreasing as it hands back exposure to strengthening International Equities in the Balanced and Conservative Strategies.

Asset Level Overview

Equities and Real Estate

U.S. Equities continued their push toward pre-COVID highs with a strong performance in July. Despite the continued strength, our allocations will generally decrease as exposure above the designated target will be returned to strengthening foreign markets. International Equities, specifically Emerging Markets, outpaced U.S. Equities on their way to reestablishing long-term uptrends. Both Foreign Developed and Emerging Markets will return to their target allocation. Real Estate remains the weakest of this group and has still failed to reestablish even an intermediate-term uptrend and will remain at its minimum allocation.

Fixed Income

Fixed Income assets, particularly in the U.S., remain near their March highs even as U.S. stocks have continued to climb. Consequently, we will continue to overweight Fixed Income, concentrated mostly in lower duration instruments. Despite lagging their U.S. counterparts, International Bonds have also recovered over the last few months and remain in uptrends across all time frames.

Four potential macro catalysts for the recent trend changes:

  • Next Round of U.S. Stimulus: The next round of coronavirus relief is expected to be passed by Congress, worth about $1 trillion. The legislation is set to provide a temporary and reduced extension of unemployment benefits, another round of stimulus checks, liability protection for businesses, and funding to help schools restart.

  • Increased U.S./China Tensions: In a recent speech Secretary of State Mike Pompeo reiterated, “Washington will no longer tolerate Beijing’s attempts to usurp global order.” China announced last week that it ordered the United States to shutdown its consulate in Chengdu, following U.S. demands to close the Chinese consulate in Houston, TX.

  • EU Stimulus Package: Leaders of the European Union agreed on a historic deal for a €750 billion stimulus plan. As a result, the European Commission can now raise billions of euros in capital markets on behalf of all 27 states. The fund will comprise €390 billion in grants and €360 billion in low-interest loans.

  • Mixed U.S. Economic Data: Initial unemployment claims in the first week of July rose from 1.31 million to 1.41 million, the first increase since March. Meanwhile, new-home sales increased to an almost 13-year high — fueled by record-low borrowing costs — adding to evidence that residential real estate is the brightest spot in the economy.

Global [Market] Weirding

...We are all in this world of unpredictability, we are building the bridges, crossing the river and writing the instruction manual as we do so.”

– Greg Sankey, Commissioner of the Southeastern Conference

The year 2020, thus far, has served up harsh reminders of the unpredictability of events, particularly those with severe second and third order effects. Seven months through the year, amidst a sea of instability, there are some very interesting and, in some cases, historical performance divergences among widely quoted equity indices.

Among the 2020 anomalies we find most interesting are:

  • The historical small number of stocks making up a large percentage of the S&P 500

  • The large performance difference between growth and value stocks

These anomalies are largely responsible for the polarized performance in many major equity market indices. In fact, depending on its focus, many indexes fall into one of three camps:

  • Significantly higher (tech heavy)

  • Flat (mega cap driven, market cap weighted)

  • Significantly lower (value focus, Warren Buffett, dividend, low volatility)

Note the divergences between those “safer” factors in equities versus their “riskier” counterparts. Now, consider a conversation between a client and a typical advisor: “Mr. & Mrs. Jones, as you near retirement I suggest you invest in safer dividend-paying stocks. They are typically more value oriented and have lower volatility than most stocks.” This thread of “conventional wisdom” is widespread across the financial industry, but has been turned on its head with the events experienced this year. In fact, the three factors described – value, high dividend, low volatility — are among the worst performing this year.

We are not, in this writing, challenging the efficacy of the aforementioned (and completely fictitious) advice, or even challenging the factors themselves. What we are pointing out is that commonly held beliefs, particularly relating to markets, can often be based on small samples from historic practice rather than overarching themes evidenced in current data.

We will never guide your future by “conventional wisdom” or “rules of thumb” alone. When unprecedented events occur, we have a strategy that can nimbly react, and keep you in the best position to arrive where you intend over the long run.

Please feel free to call or email us for additional details. We would be happy to discuss our take on the current environment with you in greater detail.


David Childs, Ira Ross, Blaise Stevens, and Eric Warren

Spartan Planning

Disclaimer: this note is for general update purposes related to the strategy and approach of Spartan Planning portfolios. Every client's situation including Risk Profile, Time Horizon, Contributions, and Distributions is different from other clients. Your particular exposure to any given asset class will depend on your goals, risk profile, and how tactical or passive your risk profile calls for. If there have been changes to your risk profile and/or goals or if you wish to discuss them in more depth please contact your advisor. This email and the data herein is not a solicitation to invest in any investment product nor is it intended to provide investment advice. It is intended for information purposes only and should be used by investment professionals and investors who are knowledgeable of the risks involved. No representation is made that any investment will or is likely to achieve results comparable to those shown or will make any profit at all or will be able to avoid incurring substantial losses. While every effort has been made to provide data from sources considered to be reliable, no guarantee of accuracy is given. Historical data are presented for informational purposes only. Investment programs described herein contain significant risks. A secondary market may not exist or develop for some investments portrayed. Past performance is not indicative of future performance. Investment decisions should be made based on the investors specific financial needs and objectives, goals, time horizon, tax liability, risk tolerance and other relevant factors. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Investors should consider the underlying funds’ investment objectives, risks, charges and expenses carefully before investing. The Advisor’s ADV, which contains this and other important information, should be read carefully before investing. ETFs trade like stocks and may trade for less than their net asset value. Spartan Planning Group, LLC (“Spartan” or the “Advisor”) is registered as an investment adviser with the United States Securities and Exchange Commission (SEC). Registration does not constitute an endorsement of the firm by the SEC nor does it indicate that the Adviser has attained a particular level of skill or ability. Indexes are unmanaged and do not incur management fees, costs, and expenses. Spartan’s risk-management process includes an effort to monitor and manage risk, but should not be confused with and does not imply low risk or the ability to control risk. There are risks associated with any investment approach, and Spartan strategies have their own set of risks to be aware of. First, there are the risks associated with the long-term static holdings for each of the strategies. The more aggressive the Spartan strategy selected, the more likely the strategy will contain larger weights in riskier asset classes, such as equities. Second, there are distinct risks associated with Spartan Strategies’ shorter-term tactical allocations, which can result in more concentration towards a certain asset class or classes. This introduces the risk that Spartan could be on the wrong side of a tactical overweight, thus resulting in a drag on overall performance or loss of principal. International investments may involve additional risks, which could include differences in financial accounting standards, currency fluctuations, political instability, foreign taxes and regulations, and the potential for illiquid markets. Investing in emerging markets may accentuate these risks. Diversification strategies do not ensure a profit and do not protect against losses in declining markets


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