July 2020 | Portfolio Update

Dear Spartan Client,

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

At a Glance: Allocation Adjustments heading into July, 2020

  • U.S. Equities: Increasing exposure due to return of long-term uptrend.

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

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

  • Intermediate-term Fixed Income: Remains in uptrends across all timeframes for U.S. Bonds. International Bonds move to uptrends across all timeframes. Overall, Fixed Income exposure will decrease from last month but remain overweight in the strategies.

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

  • Short-Term Notes and Cash Equivalents: Decreasing as it hands back exposure to strengthening U.S. and International equities.

Asset Level Overview

Equities and Real Estate

For the first time since February, U.S. Equities are experiencing both intermediate and long term uptrends leading to full exposure going into July. International equities continue to lag the U.S. but have increased enough to begin an intermediate-term uptrend. Real Estate is the weakest of the equity-like piece and has not been able to hold uptrends in any time frame as we enter Q3 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, Spartan will continue to be overweight Fixed Income, concentrated mostly in lower duration instruments. Despite lagging their U.S. counterparts, International bonds have also recovered over the last month to regain uptrends across all time frames.

Four potential macro catalysts for the recent trend changes:

  • Continuation of Asset Purchases by the Fed: The Fed continued its asset purchase program in June by buying corporate bonds and ETFs. The Central Bank has expanded its efforts of increasing the supply of cash by purchasing bonds in speculative-grade companies through the SPDR Bloomberg Barclays High Yield Bond (JNK), a fund in which the Fed now holds a $412 billion position.

  • Record Increase in Coronavirus Infections: The national total of daily new confirmed infections reached a record high on June 24th with a rapid increase in confirmed new cases particularly across the Southern U.S. and California.

  • New Record Lows in U.S. 10-year Yields: Fears over new Coronavirus cases and continued Fed support pushed the yield on the U.S. 10-year note to 0.64%, its lowest level since mid-May.

  • New Tariff Threats Between the U.S. and Europe: Tensions between the U.S. and Europe intensified as the U.S. threatened additional tariffs of $3.1 billion (USD) on EU and UK products. The EU believes a wider range of tariffs will inflict unnecessary economic damage on both sides of the Atlantic.

Dealing with Change

What we need to do is always lean into the future; when the world changes around you and when it changes against you - what used to be a tailwind is now a headwind - you have to lean into that and figure out what to do because complaining isn't a strategy.

-Jeff Bezos

At a time when many economic indicators are at or near their all-time negative readings, large-cap stocks in the U.S. have managed to re-gain long-term uptrends and are within striking distance of all-time highs. In fact, the Nasdaq made new historical highs in June. To many, this comes as a huge surprise. A common question is “have you ever seen such disconnection between the markets and reality”?

This is indeed a great question, and yet as the third quarter begins it is still too soon to know whether we have a lasting bear market on our hands or simply a price shock which will be soon forgotten on the market’s relentless march higher. The U.S. large-cap markets have seemed impervious to negative news since the second half of March, at least until the last several days of June when reopening plans among many states have been halted due to new COVID breakouts.

Given the v-shaped pattern of U.S. large caps’ recovery so far, it now seems we are nearing a crossroads as we enter the second half of 2020. Still, down 10+% from all-time highs, the question is whether U.S. equities can continue shrugging off bearish economic data in favor of rising equity prices or begin to reflect the reality that the pandemic is wreaking significant economic havoc. Since the market consists of more than just Large Cap US Equities, a quick zoom out reveals other sectors including mid and small cap stocks in disarray and Real Estate indexes showing textbook retracement in an established bear market.

Sir Isaac Newton – Smart Guy, but not Smarter than Markets

In a time when markets appear to be ignoring reality, perhaps it is helpful to know that this is nothing new. Even the brightest among us can find themselves confused. Sir Isaac Newton was a smart guy – he is recognized as one of the most influential scientists of all time with credits for discovering gravity and identifying important laws of motion. And yet, after losing his fortune in the buying frenzy of the South Sea Company, he lamented that he ‘could calculate the motions of the heavenly bodies, but not the madness of the people’.

Still a Long Way to Go - Part II

At Spartan, we continue to follow our principles and rules no matter what magic spells appear to envelop markets due to the ‘madness of the people’. This will not lead to a perfect synchronization for capturing increases and sidestepping declines but our goal, however, is to help keep you on the path to the future you have been planning. As we frequently say, managing risk in a repeatable way for any environment, but particularly one like this, is a marathon and not a sprint.

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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