Special Portfolio Lineup - April 8, 2020

I have adjusted the model portfolio lineup over the last few weeks to prepare for different scenarios of recovery from the Coronavirus Crisis. The new lineup will be helpful but the change may present some confusion, so I'll detail the new lineup here.  At the end of this post, I also detail a new addition to the lineup - the "Onyx Special 2020 Recovery (sg117)" portfolio.

Lineup on Diamond Publication

On the Diamond publication (and most others), there are three sections of model portfolios:
  1. Those emphasizing the ETF DDM
  2. Those using a mix of DDM and the Onyx sleeve of low volatility sectors
  3. Other model portfolios included on the publication for legacy reasons. Some subscribers like to see the additional alternatives. 

The most widely used model portfolios are Diamond (sg131) and Diamond-Onyx Mix (sg218).  These are now indicated by being labelled in all capital letters.

The model portfolio labels indicate an important guide to the aggressiveness of the model portfolio.  The aggressiveness of these portfolios is best expressed in terms of their maximum allocation to DDM. The "70-30" in "Diamond (Main) 70-30 - (sg131)" indicates the maximum percentage allocation to DDM, 70%, and the minimum allocation to defensive ETFs, 30%, which are UST and SHY.

As you can see, the aggressiveness of the model decreases as you go down the list.  The most aggressive of the model portfolios are to the top of the list.  The least aggressive are at the bottom.

Section1: Emphasis on D5 Signal Set for the DJIA - These focus on using the D5 signal for the DJIA-linked ETF DDM, which gives two times the return of the DJIA on a daily basis.

I have recently added the Diamond Plus (sg231) portfolio in order to create a more aggressive option of the main model portfolio (sg131).

85%    Diamond Plus 85-15 - 2020 Recovery (sg231) - NEW
70%    Diamond (Main) 70-30 - (sg131)

I have designed "Diamond Plus 85-15 - 2020 Recovery (sg231)" to benefit subscribers, most of whom have been using the Diamond (Main) portfolio in February and March as the market declined. This new portfolio will be particularly helpful after the second bottom of the W-shaped market recovery pattern. Indicators I will watch for include increased market resilience, with especially strong Exceptional Macro MRI.

Section 2: Mixes D5 Signal Set and Low Volatility Sectors (Onyx)

I have created a broader set of Diamond-Onyx Mixes based on the existing model portfolio Diamond-Onyx Mix (sg218). Each member of this set of portfolios has the same ETFs and signals, but they vary based on the maximum weight they can have in the ETF DDM.  The higher the maximum allocation to this Diamond component, the more aggressive is the model portfolio.  The balance of the weight is in the Onyx set of ETFs.  Thus, Diamond-Onyx 35-65 Mix (sg218) has a maximum of 35% in DDM.  Sixty-five percent is in Onyx, which includes cashlike bonds (SHY), Consumer Staples stocks (XLP), Utility stocks (XLU), and the 10y Treasury bonds ETF x2 (UST).

50%    Diamond-Onyx 50-50 Mix (sg118) - NEW
35%    Diamond-Onyx 35-65 Mix (sg218) - this is the original mix
18%    Diamond-Onyx 18-82 Mix (sg318) - NEW

Potential Guidance to Increase or Decrease the Aggressiveness of Your Account

This lineup will make it easier for you to adjust the aggressiveness of your account as we move through the recovery.  I may issue guidance for our regular Friday trades or earlier in the week to make an adjustment.  For example, I may say to reduce aggressiveness when the market gets to the peak of the relief rally.  If this occurs, you can easily switch to the target weights of the model portfolio lower on the list.

I may give guidance to increase the aggressiveness of your account at the second bottom (if that does occur) or when the stock market is otherwise very resilient.