Worry less | Enjoy more
We invite you to call us to discuss how this data informs our strategy and how a ZENdex Portfolio could be a powerful addition to your overall investment mix. We weigh the data below heavily when developing our portfolio strategy, in which we aim to maximize the relationship between performance and protection while minimizing taxation.
ULTRA-CONSERVATIVE | BOND REPLACEMENT | GROWTH | MANAGED OPTIONS
S&P 500 RELATIVE TO ITS ALL-TIME HIGH
For ZENdex portfolios, this is the picture of opportunity.
S&P 500 Top (A): 1/4/22
Subsequent Low (B): -14.61% 2/24/22
Currently Off High (C) : -8.84% 4/14/22
Correction Duration (D): 100 days
Recovery Value (E): 17.10%.
Recovering from a decline of 14.61% requires a gain of 17.10% from the February 24th low.
R = A = Point of Recovery
The S&P 500 is represented by the SPX and refers to the price return index, not the total return index.
S&P 500 RELATIVE TO ITS MOVING AVERAGES1
To add or not to add (risk)?
We look at the benchmark’s statistical deviation from its mean in order to determine whether to add, or to reduce, risk.
Within our ZENdex investment methodology, readings two standard deviations or more above the mean compel risk mitigation.
Readings two standard deviations or more below the mean compel the addition of risk.
The daily and weekly measures prompt more tactical / shorter-term action, while the monthly measure calls for more strategic/longer-term action.
TREASURY YIELD CURVE VS CONSUMER PRICE INDEX2,3
The stock market has only ever followed two different patterns: that of decline-and-recovery and that of consecutive new highs.
Because higher inflation makes it more difficult for corporate earnings to translate into higher stock prices, the odds of extended periods of decline-and-recovery go up.
This is of particular concern to people living off of their investments since drawing on the portfolio while it is down impairs its ability to recover and therefore to provide future income. ZENdex addresses this problem directly.
THE PHILLIPS CURVE4,5,6
We follow the Phillips Curve to understand what impetus the Federal Reserve has to adjust interest rates, its balance sheet, or both.
You don’t fight the Fed, as the old adage goes, and the Fed’s policy decisions will change the odds of a prolonged period of decline-and- recovery in the stock market.
Having arrived at what is, for all intents and purposes, full employment, the Fed has unsurprisingly begun tapping the breaks by raising rates and addressing the size of its balance sheet.
One misstep in this delicate dance and the stock market takes a hit. That’s a problem for stock portfolios, but an opportunity for a ZENdex portfolio.
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- Source: thinkorswim desktop trading platform.
- Source: https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/textview.aspx?data=yield
- The measure of inflation is the year-over-year change in the Consumer Price Index (CPI). Source: https://www.bloomberg.com/markets/economic-calendar
- We are displaying inflation as measured by the Consumer Price Index (CPI). It’s worth noting, however, that the Federal Reserve states its goal for inflation in terms of the Personal Consumption Expenditures (PCE), which is highly correlated to CPI but can generate different readings. The PCE can be found here: https://www.bloomberg.com/markets/economic-calendar. For more information on how CPI and PCE differ, you can go to: https://www.clevelandfed.org/newsroom-and-events/publications/economic-trends/2014-economic-trends/et-20140417-pce-and-cpi-inflation-whats-the-difference.aspx
- https://fred.stlouisfed.org/series/UNRATE. For our purposes, we are considering full employment to have been when the unemployment rate was at 3.5% just prior to the pandemic. Because the Federal Reserve considers many variables in arriving at what it ultimately deems to be “full employment,” the unemployment rate that represents full employment can, itself, be a moving target.
- Source: https://www.bloomberg.com/markets/economic-calendar