Rutherford Portfolio Review (Tranche 5): 6 January 2023

Cormorant at Moreton Island, Queensland, Australia.

The first week of 2023 was a short 4-day week for trading in US Equities and was a relatively quiet week before we saw a 100-point range day on Friday:

However, we are still sitting in no-man’s land and looking for direction. Although US equities closed the week ~1.5% higher from the 2022 close they lagged other asset classes:

with Bonds and International equities leading the way by a relatively large margin.

Current holdings in the Rutherford Portfolio look like this:

with Tranche 5 (the focus of this week’s review) holding positions in VTI, VEA, PCY and AOR (the benchmark fund).

Portfolio performance since moving to a rotation system in mid-December looks like this:

i.e we have fallen slightly below the AOR benchmark – but volatility has been low and it is too early in the year to draw conclusions at this point. We see a little separation in the performance of the individual tranches (due to timing or review-date luck) but, again, nothing too obvious at this point. Perhaps the most significant observation is the fact that the system has generated signals to Sell US equities (VTI) over the past 4 weeks and we have progressively reduced holdings in this asset class over this period. So, let’s take a look at the rotation graphs:

where we see positive movement in the desirable top right quadrant from VEA, PCY,RWX, VWO and GLD. Checking the recommendations from the algorithm being used:

we have Hold Recommendations for VEA and PCY but Sell recommendations for VTI (again) and AOR. The recommendation is to use the Cash generated from the sale of shares in these asset classes and to Buy shares in VWO (Emerging Market equities) and GLD (Gold). This week’s adjustment will therefore look something like this:

to comply with the system recommendations.

David