Rutherford Portfolio Review (Tranche 4): 30 December 2022

Entrance to Milford Sound, New Zealand, South Island

2022 comes to a close with US equities down ~20% from the all time highs hit on 4 January – at the beginning of the year:

We are still in the downtrend channel and need to see a break-out above 4100 (the prior pivot high) before we might consider suggesting a possible reversal to a new bullish trend. The other side of the coin is to recognize that there is also a strong case to be made for a continuation of the current bearish trend to at least test the 2022 lows at ~3500. Prices have basically consolidated in a sideways channel for the past 2 weeks.

In terms of performance relative to other asset classes, US Equities remain in the center of the pack:

with Gold, International Real Estate, Emerging Market Equities and Commodities leading the field and Bonds trailing.

Current holdings in the Rutherford Portfolio look like this:

resulting in the performance as shown in the following screenshot:

I have now transitioned completely to the rotation system so next week I will only be showing performance from the point when this transition was completed and the tranche allocations rebalanced. However, for now, the above chart shows the performance of the Rutherford Portfolio using the BHS system and the notable dependance on timing (review-date) luck on performance  as seen in the relative performance of the individual tranches. However, after 2 years, the total portfolio returns turn out to be virtually identical to those achieved by the benchmark AOR Fund – although with less volatility/lower draw-downs – so, arguably, a little more comfortable for nervous investors.

Checking on the current rotation graphs:

we see that VEA, PCY and RWX are showing strongly in the desirable top right quadrant of the chart although VEA has weakened significantly in the short term (as depicted by the downward trajectory from head to tail).

Taking a look at recommendations from the algorithm that I am using:

we see a Buy recommendation for GLD and Hold recommendations for VEA and PCY. VTI, that is currently held in tranche 4 (the focus of this week’s review), is showing as a recommended Sell as is the benchmark Fund AOR.  With a weak Score of only 1 (from long-term strength) even though the 13/49 EMA cross-over is positive, I plan to sell current holdings in both VTI and AOR and add to current holdings in GLD:

This will leave me with ~$5,000 Cash in Tranche 4.