Example Portfolios Geared to Growing Your Wealth in Any Market Environment
Not Your Standard Stock / Bond Portfolio
At Signals Matter, we recognize the value of hard-earned wealth and are here to grow and protect it. With interest rates hovering near zero and threatening to rise, bonds no longer provide a “safe-haven” hedge against stock declines. Stocks too are over-valued, which means double-trouble for traditional investing. Keeping your money safe requires diversification outside of just stocks and bonds to less-correlated, alternative solutions. That’s what we do; that’s how we help.
Signals Matter Portfolios
Why Our Portfolios are Different
Better performing portfolios are portfolios that are diversified beyond stocks and bonds. Meaningful diversification is not about growth vs. value, or high-cap vs. low-cap, or stocks vs. bonds. It’s about allocating smartly across less-correlated asset classes that include real estate, currencies, commodities, precious metals, sector-focused funds, countries, and other alternative choices, including inverse investments that make money when stocks and bonds fall. Signals Matter portfolios are:
Our truly diversified portfolios incorporate all asset classes, not just multiple flavors of highly correlated stocks and bonds, with emphasis on containing interest rate risk.
Actively-managed portfolios zig when the markets zag, providing important portfolio protection as stocks fall, interest rates rise, and business conditions deteriorate.
We populate our portfolios with cheaper, easier-to-trade, and more tax-efficient ETFs that provide our investors options for diversifying away from stocks and bonds.
We Care About Market Risk
And actually do something about it.
How We Measure
Measuring global market risk is a strategic concept, requiring discipline, planning, implementation, and constant monitoring of global macro and market risk factors. Containing market risk provides an extra layer of protection when markets tumble.
How We Monitor
We monitor market risk by constantly parsing current and forecast GDP; yield curve variances; trends across global equities, bonds, currencies, and commodities; and an extensive array of leading and proprietary indicators that forecast stormy weather ahead.
How We Apply
Market Risk scores inform on the percentage allocations of short-term treasury and inflation-protected ETFs across our three portfolios, allocating more to the Conservative Portfolio, less to the Moderate Portfolio, and none to the Aggressive Portfolio.
Example Subscriber Content
From Macro to Tracking Recessions to Portfolio Suggestions
With stocks at nosebleed records, Bitcoin at $60,000, and Tesla topping a $1 trillion valuation on low revenue, timing the next bubble is back in vogue. The simple truth is that crashes of all stripes have one thing in common: they surprise the uninformed. Our Market Reports, Updates, Charts and Dialogue keep Signals Matter Subscribers in the know and decidedly informed.
How about a bit of background on Signals Matter?
Signals Matter, LLC was founded in April 2017 by Thomas Lott and Matthew Piepenburg as an online publishing company to provide subscribers with timely financial market analysis and specific portfolio investment ideas.
Is this a Trading Service?
No, although we do intend to launch a trading service that will automate investing for subscribers in late 2021/early 2022. For now, this Signals Matter website is provided strictly for informational and educational purposes only and is not intended as investment advice or as a recommendation to buy or sell any security. Information provided reflects our views and our research and should not be interpreted as investment advice, as an offer or solicitation, nor as a direction to purchase or sell any financial instrument. Our views concerning financial market trends and risk probabilities are based on market conditions that will fluctuate. There can be no assurance that an investor will achieve profits or avoid incurring substantial losses by investing in the Portfolio Suggestions presented by Signals Matter. Past performance of any posted Suggestion is not indicative of future results.
Why do Signals Matter?
Market signals are all that matter when it comes to investing, to building all-weather portfolios, and to managing risk. That's why we created Storm Tracker, our mathematically-derived algorithm that informs on market risk and determines appropriate cash exposure across our portfolios.
What is Storm Tracker?
Storm Tracker, unique in the industry, tracks the probability of stormy weather (market stress) ahead by monitoring over a hundred metrics that track GDP, Sector Trends, Leading Indicators, Yield Curves, and Déjà Vu, our in-house risk indicator that compares yield spreads with stock movements. Storm Tracker measures overall market risk on a scale of 0% (no market risk) to 100% (extreme market risk).
How is Storm Tracker Applied?
As broad market risk rises, cash allocations within the Conservative and Moderate Portfolios rise as well. Our Conservative Portfolio is constructed with a full Storm Tracker cash allocation (e.g., an allocation equal to current Storm Tracker risk probabilities). Our Moderate Portfolio receives a half Storm Tracker cash allocation. For the Aggressive Portfolio, there are no Storm Tracker allocations.
Is investing an art or a science?
Constructing portfolios that hold up in all weather conditions is more than a science. It's an artful science that builds upon informed investing, market cycle discovery, meaningful diversification, risk reduction, technical analysis, and proper benchmarking – all geared to optimize return and minimize risk.
How do you solve for risk?
Risk tolerance is our starting point at Signals Matter. We construct portfolios around two notions of risk suitability: (a) suitable risk for the client, considering a client's financial condition and goals; and (b) suitable market risk, taking into account levels of market stability and instability.
What’s your actively managed solution?
Signals Matter draws heavily on Exchange Traded Products (ETPs) to populate its portfolios. ETPs are a category of exchange-traded investment vehicles that include two subsets, Exchange Traded Funds (ETFs) and Exchange Traded Notes (ETNs), with allocations to ETFs by far the greater of the two. The universe of ETPs provides traditional but also actively managed solutions that enable investment advisers to diversify clients away from traditional stocks and bonds during adverse market conditions for traditional investing. Signals Matter tracks over 1,000 US-domiciled, liquid ETPs. Our opportunity set includes ETPs across stocks, bonds, currencies, commodities, actively-managed, and inverse ETPs (that track the inverse of long-only indexes). Inverse ETPs provide simple, cheap, and liquid solutions to hedge (i.e., short) certain market sectors within our portfolios, enabling clients to profit should stocks fall. Unlike mutual funds, which are priced at the end of the day, ETPs are priced continuously during each market session, affording frequent and continuous price discovery.
What are ETPs, ETFs, and ETNs?
Signals Matter portfolios are allocated to Exchange Traded Products (ETPs), namely and mostly to Exchanges Traded Funds (ETFs), but also to Exchange Traded Notes (ETNs). ETPs, like mutual funds, are types of securities that track underlying securities, an index, or other financial instruments. Unlike mutual funds, ETPs trade live on exchanges similar to stocks, meaning their prices can fluctuate from day-to-day and intraday. Comparatively, ETPs are usually a low-cost alternative to mutual funds and can contain from a few to hundreds of underlying investments. They can be benchmarked to various investments, including commodities, currencies, stocks, bonds, and others.
What does "alternative investing" mean?
Alternative investing is a core strength at Signals Matter and is deployed across all Signals Matter portfolio solutions, a prime differentiator from traditional Financial Advisors (FAs) and Registered Investment Advisors (RIAs). FAs and RIAs invest primarily in stocks and bonds. Alternative investing relates to investing in anything that's not a stock or a bond, as with private equity, venture capital, real estate, hedge funds, managed futures, art and antiques, commodities, derivatives contracts, and alternative-oriented Exchange Traded Products (ETPs). Alternative investing diversifies portfolios and can be performance-enhancing during periods of systemic market change or stress.
What's the difference between "active" and "passive" portfolio management?
Active portfolio management takes a hands-on approach to portfolio construction, going when and where the opportunities arise. Passive investing involves less buying and selling, often resulting in portfolios populated with traditional stocks and bonds, frequently expressed as index funds or mutual funds. While active and passive investment approaches each have a role to play, each is highly dependent upon the macro environment.
At Signals Matter, we believe that active portfolio management beats passive portfolio management hands down during periods of extreme market stress, at market tops, and during changing interest rate regimes. For us, meaningful diversification is not about growth vs. value, or high-cap vs. low-cap, or stocks vs. bonds. It's about allocating smartly across less-correlated asset classes that include real estate, currencies, commodities, precious metals, sector-focused funds, countries, and other alternative choices, including inverse investments that make money when stocks and bonds fall.
Actively managed portfolio components generally zig when the markets zag, reducing portfolio volatility, thus providing a calmer ride with the potential to compound to a higher place over time.
What happens if interest rates rise post-pandemic?
At Signals Matter, we believe that the key to any great portfolio is the investments it holds and the macro-environment surrounding it. Interest rates are a core variable that significantly impacts portfolio returns across traditional stock and bond investing. Having fallen for a decade, interest rates could easily make the turn as the pandemic lessons and inflation returns.
Given unprecedented levels of post-2008 central bank intervention in the public markets by deploying trillions of printed dollars (i.e., Quantitative Easing or QE), used to facilitate the purchase of U.S. Treasuries and other critical U.S. debt instruments, the Federal Reserve has been recently able to essentially "buy" large swaths of the credit/bond market, keeping interest rates (and interest rate risk) low.
In our view, the risk of rising interest rates is a clear and present danger to traditional investing. Just as falling interest rates have favored both stocks and bonds for the last decade, as interest rates rise, we believe stocks and bonds could together be adversely impacted, clearing the runway for actively-managed, alternative investing solutions like ours. As interest rates rise, bonds fall, no longer providing a reliable or suitable portfolio hedge; corporate earnings fall as well, as interest rates take a bigger bite out of profits.
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OUR PURPOSE IS TO EDUCATE
Signals Matter content is provided for informational and educational purposes only and is not intended as investment advice or as a recommendation to buy or sell any security. Information contained on the Signals Matter website is based upon our views and our research and should not be interpreted as investment advice, as an offer or solicitation, nor as the purchase or sale of any financial instrument. Statements concerning financial market trends and recession probabilities are based on current market conditions, which will fluctuate. There can be no assurance that an investor will achieve profits or avoid incurring substantial losses by investing in the Portfolio Suggestions presented by Signals Matter. Past performance of any posted Suggestion is not indicative of future results.