Remembering Bear – Another wonderful dog.
Huygens is the portfolio up for review this morning. Before getting into the portfolio update here are three important measurements to use as references or indicators as to future market movement. We know the Shiller CAPE and Buffett Indicator are both showing the market is overvalued. This was also true in 1996, but the market powered forward for another three years. In the years 1999 through 2001 the market lost approximately 50% of its value before springing back. Is this market similar to the market in 1996 or 1999? That is the big question. There are three important indicators that may help us make informed decisions.
- Unemployment percentage and another metric to closely monitor is the jobs rate each time it is reported.
- The national unemployment rate has trended slightly higher in 2026, sitting at 4.3% as of the latest data from the Bureau of Labor Statistics, up from multi-decade lows of about 3.4% recorded in previous years.
- Inflation rate and the direction it is moving.
- US Inflation Rate is at 3.80%, compared to 3.30% last month and 2.30% last year. This is higher than the long term average of 3.27%. The direction is not a positive for equities.
- Interest rates set by the FED and its direction.
- The Federal Reserve’s target range for the federal funds rate is currently 3.50% to 3.75%. The effective federal funds rate hovers around 3.62%. The direction needs to be monitored over the next several months. Once more, this is not positive for equities.
Based on the above three indicators we are likely somewhere between 1996 and 1999 when it comes to projecting the direction of the market. Bottom line is that we are not in a good place for continuation of the current bull market. However, it is likely to last a few more months.
And now to move on to the Huygens portfolio update.
Huygens Security Holdings
Below are the asset classes and ETFs that mirror or represent the different asset classes.
Huygens Rebalancing Recommendations
Huygens is a very conservative portfolio as indicated by the very low beta of 0.295.
If I were to make any moves it would be to simplify the portfolio and reduce the securities from 17 ETFs to 10 to 12. Right now the portfolio over diversified.
Huygens Performance Data
Dividends have yet to be reported for SCHO so that should help performance slightly.
Huygens Risk Ratios
Other than the Information Ratio, the Huygens is performing better than it was a year ago. Based on the current makeup of securities the portfolio should perform better than average in a bear market as compared to a bull market.
Comments are always appreciated.
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My condolences for your loss of Bear.