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June 2020 | Portfolio Update

Updated: Jul 2

Dear Spartan Client,

We are reminded during times like these of how grateful we are to be here to serve our clients and friends.


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


At a Glance: Allocation Adjustments heading into June, 2020

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

  • International Equities: No change to minimum allocations due to continued downtrends in all time frames 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: Remains in uptrends across all time frames for U.S. Bonds. International Bonds continue to experience downtrends across all time frames. 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 time frames.

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


Asset Level Overview

Equities and Real Estate

After bottoming on March 23rd, U.S. equities have slowly advanced upward, approaching February’s end of month levels. These increases have been enough to change the state of trends across all cap levels in the U.S. While still underweight, Spartan portfolios will see an increase in exposure to this asset class.


Fixed Income

Fixed-income assets in the U.S. remain near their March highs even as U.S. Stocks have made up for all of the March declines. Consequently, Spartan will continue to be overweight Fixed Income, concentrated mostly in lower duration instruments.

Three potential macro catalysts for the recent trend changes:


  • Continued Fed Support: Optimism about a possible new round of monetary and fiscal stimulus generated confidence as Federal Reserve Chair Jerome Powell stated that the central bank had other tools available to counteract the slowdown, saying that “there is really no limit to what we can do.”

  • Further Increases in Unemployment: The month’s latest jobless claims report showed that an additional 2.1 million Americans had filed for benefits in the previous week, bringing the trailing nine-week total to nearly 41 million.

  • More ECB Stimulus: Germany and France proposed a €500 billion recovery fund, giving impetus to a coordinated European fiscal response to the coronavirus pandemic. The proposal would be linked to the EU’s next seven-year budget cycle from 2021–2027, and the funds would not be available until then.


Ninety Days In


It has now been 3 months since Spartan’s strategies began adjusting to the changing market dynamics caused by COVID-19. We wanted to spend some time this month defining the three main systems that comprise our strategies, walking you through our process in the interest of continued transparency and understanding. As we have said repeatedly, our country almost certainly still has a long way to go until it reaches the destination beyond the effects of this pandemic.


As expected, intermediate trends were the first to change causing a risk reduction at the end of February for Spartan’s tactical portfolios. Negative long-term trends followed in March, causing our strategies to further reduce risk at the end of the month.


We treat your future like most life situations that encounter risk. Similarly to when a campfire flares up you back away out of danger but stay close enough to still feel some warmth. As the fire gets back under control you slowly move closer, only sitting down next to it once it is completely safe. This analogy illustrates how the strategies we employ work in an objective data-driven manner, to keep your future in the most advantageous place as possible. It is always easier to move closer to the campfire than it is to put out a blaze when you are already on fire.


Whether we like it or not, human brains are wired to think in the moment. This means that small costs in the short term are often emotionally outweighed by large future benefits derived from that same small ‘cost’. In a planning environment, this becomes increasingly difficult as you attempt to maintain a prudent plan during emotionally charged environments. Our goal is the long-term adherence to rules and strategies with a defined edge that is put in place to help you achieve your goals.


As you may recall from last month’s update, the most accurate comparisons thus far for the “Coronacrash” (1987, 2008) took many months to play out. We would expect nothing less in this case. 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.

Best,

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 strategic 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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