Rutherford Portfolio Review (Tranche 4): 29 April 2022

Zebra in Hluhluwe-iMfolozi Game Reserve, South Africa

The 420 price level has been a strong and significant support level for SPY (representing US Equity markets) a number of times in the first four months of 2022:

However, after an attempted bounce on Thursday, SPY sold off on Friday afternoon to close near the yearly lows and down almost 15% From the January all-time high. Price still seems to be tracking the bearish regression line (D3-D) that I drew a few weeks ago and, if we get any follow-through next week I don’t see a lot of support until we get to 400 (D). This would be threatening a ~20% drawdown from the beginning of the year. Implied Volatility is still on the rise indicating a high degree of uncertainty.

Let’s check on how equities have performed relative to other asset classes:

where we see that only commodities (DBC) were in positive territory over the past week. This is a little disconcerting since it means that the inverse correlation between equities and bonds has broken down – and everyone is fleeing to the exits. This is a common feature of “stressed” markets – when we need it most, asset diversification doesn’t help us.

How has the Rutherford portfolio held up?:

pretty well actually – due to a 50+% allocation to Commodities and Gold (DBC and GLD):

So let’s see what the BHS model is recommending:

where DBC and GLD remain the only recommended Holds as for the past ~4 weeks.

Checking the rotation graphs:

we see significant confusion and no clear direction, The rotation models offers the following suggestions for consideration:

however, since I have holdings of VNQ and RWX in other tranches and with no clear incentive to add to these positions I will continue to hold the benchmark AOR fund and I will not make any adjustments until I see a clearer picture of where we might be going from here.

David