Rutherford Portfolio Review (Tranche 5): 19 August 2022

Sunset in the Mountains, Drakensberg, South Africa

The markets took a breather this week. Although US equities remain well within their upward channel there was a pullback from near the top of the channel to the center:

If prices continue the pullback we are likely to see support at ~417 that has been an area of strong support/resistance in the past.

This week’s drop in US equities was ~1.5% but, since no major asset classes generated a positive return, this was not too bad on a relative basis.

Current holdings in the Rutherford Portfolio look like this:

and performance like this:

We are still managing to stay slightly ahead of the benchmark – but last week’s acquisition of a small position in PCY didn’t exactly turn out all that well 🙂 – but we’ll wait and see.

Lets check rankings and recommendations from the BHS model:

Still nothing … and a bit of red creeping into the short-term signals. So, let’s take a look at the rotation graphs:

where we only see VTI really shooting into that top right quadrant – although VNQ is also making an attempt. Is this being reflected in the new algorithm that I’ve been looking at? – let’s check:

Yes, they’re both there, together with PCY and the benchmark AOR. So, I’ll continue to follow these recommendations as shown in the following screenshot:

i.e. I’ll sell my holdings in TLT in Tranche 5 (the focus of this week’s review) and, together with the existing Cash, I’ll use the proceeds to buy shares in AOR, VTI, VNQ and (more) PCY – glutton for punishment.

I have been running manual backtests on the new model for the past 3-4 weeks (very laborious job) and I hope to finish them in the next few days at least to the point that I can post some results. However, don’t get too excited – as with other rotation models that I’ve looked at, performance doesn’t look all that great over the longer term – although there are market conditions where it works better than the other models. I think I may have to add another filter and consider how many assets to select per review (without (over)fitting the data) – but that sets me back another month or two to backtest – and I have other things that I would rather be doing 🙂 . But look out for some preliminary results in the next week.

David