As one of five Relative Strength ITA portfolios the Kepler holds a few equity ETFs. However, as you will see in a moment, the current recommendation is to stay free of U.S. Equities and remain 100% invested in TIPs or a Treasury Inflation Protection security. In the second screenshot readers will see the settings within the Kipling that result in this recommendation.
Kepler Investment Quiver
Below is the Kepler investment quiver and the five ETFs that currently hold shares. I’ve been adding QQQ in 5 share increments as the market declines so I will not be selling those shares.
Kepler Security Recommendations
If you check the fourth column from the right you see the Position or recommendation is to sell all equities. Note the several settings that bring about this recommendation.
- The VTI Target Filter is turned on or set to Yes. To show up as a Buy the ETF needs to outperform VTI. That is what the Target Filter does.
- The look-back combination is 100- and 252-trading days. These settings are longer than the default settings.
- The model used with the Kepler is LRPC. In the Carson Trio test, the LRPC model is the strongest thus far.
Kepler Manual Risk Adjustments
As mentioned above, I’ve been adding shares of QQQ as high tech was in the oversold zone based on the latest bullish percent indicators. QQQ is made up of the 100 largest companies found in the NASDAQ. These companies will rise again so I’ll hold on to the 25 shares and set more limit orders to pick up additional shares if and when the market declines further.
I’ll set TSLOs for both VOE and VNQ, but will also hold on to ESGV as this ETF was purchased on the market dip. Additional cash will be used to purchase more shares of SCHP.
Kepler Performance Data
Even with the market dip the Kepler is far outpacing the AOR benchmark over the past 15.5 months. Now we need to check to see if the better than average return is due to taking on excessive risk. The Information Ratio is very high when there is this much separation between the portfolio and its benchmark.
Kepler Risk Ratios
The current Jensen Performance Index or Jensen Alpha is a very high 16.5. The slope (1.5) of the Jensen curve is also quite high and will be difficult to maintain. Holding nearly 48% in cash brings down the portfolio beta (0.22) and that in turn elevates both the Jensen and Treynor.
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