At RiverFront, we look at market opportunities both strategically and tactically.  Communicating our views is easiest when both are aligned and most challenging when they are at odds, as is currently the case.  Last week, we implemented a second round of risk reduction trades in our portfolios.  This trade involved selling international stocks and buying long-maturity Treasury bonds.  Our Price Matters discipline continues to highlight the long-term value offered by international stocks and the low long-term yields offered by bonds.  Despite this, we believe there is sufficient risk in stocks and adequate opportunity in Treasury bonds in the coming months to move temporarily away from our strategic stance, so these trades were based on our tactical view.

David Fuller's view

Here is a PDF of The Weekly View.

OK, fair enough and RiverFront has been very successful for many years.  I assume that they will eventually move out of Treasuries and back into equities, taking advantage of lower prices and higher yields.  Far be it from me to criticise RiverFront, but the firm has apparently chosen not to buy 2016’s red hot contra cyclical recovery sector – commodities, currently led by precious metals. 

Perhaps precious metals are regarded as too speculative for their customers, but is that really true?  After all, gold and silver have been hard money for centuries; they were arguably oversold in January after approximately four years to the downside, and interest rates remain at record lows. 

Additionally, many commodities and significant commodity shares have been recovering from exceptionally low levels this year and the latter often have excellent yields.  This is not an unusual development since commodities often attract investor interest when bull markets in stocks are long in the tooth and losing upside momentum, as I have frequently mentioned this year.