Dear Spartan Client,


“The only true wisdom is in knowing you know nothing.”


It is common for people to extrapolate recent events into the future as a permanent and continuing condition. This cognitive error shows up consistently in our daily lives and especially in the minds of investors. There’s nothing like the markets to push our buttons. So, what do our minds do with the fact pattern of the first quarter? This year, U.S. equities experienced an all-time high, a -14% peak-to-trough drawdown, and a “rip-your-face-off-type” rally from the lows of nearly 12%. Now that’s a wild quarter!

Where do we go from here? As you have heard from us many times, we rely on a systematic investing process to guide our decision-making. No emotions, predictions, or guessing are part of that process. To execute that process with extreme discipline, we must accept the reality that we know that we don’t know exactly what the future holds. To us, executing our process in the “hot seat” requires an entirely objective mindset. The irony is, for nearly all humans, that is very difficult. This is precisely the reason we rely on a set of rules to make our asset allocation decisions. Where do stocks go from here? No one knows or will ever know in advance of moves. For us, it’s about probability and attempting to put the edge of success in our clients’ favor over the long run.

In this month’s Note, we discuss the need to be adaptable, especially when making investment decisions for an uncertain future. Maintaining discipline in the face of uncertainty is the best way to keep you on track to meet your financial goals. How do we do it? By combining a good process with the necessary psychological ingredients to perform consistently over time.

Below are the asset classes utilized in our portfolios and their model-driven exposure heading into April. 

Square indicates no change month-over-month. Arrows indicate increase/decrease month-over-month. Adjustments can vary across Spartan Strategies depending on each Strategy’s objectives. What’s illustrated above most closely reflects allocation adjustments for the Spartan Growth Strategy. 

Disclaimer: this note is for general update purposes related to the general strategy and approach of Spartan Planning portfolios. Every client’s situation including Risk Profile, Time Horizon, Contributions, and Distributions is different from other clients. Your exposure to any given asset class will depend on your goals, risk profile, and how tactical or passive your risk profile calls for. If there have been changes to your risk profile and/or goals or if you wish to discuss them in more depth, please contact your advisor.

At a Glance: Allocation Adjustments Heading Into April, 2022

U.S. Equities: Exposure will increase as the intermediate-term trend turns positive, joining the long-term trend.

International Equities: Exposure will not change, as both foreign developed and emerging markets remain in downtrends across both timeframes.

Real Estate: Exposure will increase as the intermediate-term trend returns to a positive state. The long-term trend remains positive.

U.S. and International Treasuries: Exposure will not change and is at its minimum due to downtrends across both timeframes.

Inflation-Protected Bonds: Exposure will not change and is at its minimum due to downtrends across both timeframes.

Short-Term Fixed Income:  Exposure will decrease as a portion is handed back to U.S. equities and real estate.

Alternatives: Exposure will not change, as gold remains in uptrends across both timeframes.

Three potential macro catalysts for the recent trend changes:


  • Talk to me, Goose: The bond market is currently pricing in an elevated step up in rate hikes, as the Fed continues to message a stronger reaction after recent data suggested inflation is accelerating. Implied Fed Funds rates for May, July, and November are calling for a 50bps hike for each of those meetings, with hikes also at the June, September, and January 2023 meetings. That would be at least eight more rate hikes this year and a Fed funds rate of 2.25% by the end of the January meeting.
  • Watch the Birdie: March’s Consumer Price Index (CPI) print, to be released April 12, could be the highest print for this cycle of headline inflation, with consensus estimates at 8.5%. Core inflation should also peak in tandem, with consensus estimates around 6.5%, primarily due to tough year-to-year comparisons. Monthly prints are still expected to run at a 4-5% rate, or higher, for at least the balance of the year, and current estimates are that we will end the year with core CPI around 4.5%-5%.
  • Because I was Inverted: The yield curve is the graphical representation of interest rates between three months and 30 years, which usually tends to slope upwards to reflect the greater risk inherent with longer-term bonds. The 30-year rate, one-year forward, has hit 68 basis points below the forward two-year rate; this is a level not seen in more than 30 years. Additionally, the one-year forward yield curve is fully inverted, where each longer rate is lower than the prior shorter rate. Currently, the bond market is estimating a recession with a summer 2023 due date and the first Federal funds rate cut in Q4’23.

Adaptability in the Hot Seat

“During an environment that appears risky – like a pandemic, rapid inflation, or the threat of war when global equity prices are rapidly declining – it is easy to assume that we should be more defensive. However, just as quickly as things went from rosy a few months ago to correction territory, the opposite can occur and markets can rapidly make new highs. If that occurs, then the inverse emotion rapidly sets in, and fear transforms to FOMO.”

—Us (yes, we did just quote ourselves!), in last month’s edition of this Note 

By following price action in general and trends specifically, circumstances sometimes play out in a way that makes a practitioner look prescient even while rejecting the notion of prediction, as the excerpt from last month’s note illustrates.  We follow trends to remain adaptable to an ever-changing set of circumstances. Few months and quarters sum this up better than what we are experiencing as we put a bow on the first 90 days of 2022.

The first quarter experienced a new all-time high in U.S. stocks, followed by a waterfall-like decline and subsequent recovery. That feels unique, but was it? Well, if you go back almost 100 years in the S&P 500, the first quarter of 2022 ranks just outside the 10 ten worst first quarters for the number of days with negative returns. This is particularly remarkable when you consider this is the case AFTER one of the strongest 10-day periods in the index’s history. In fact, as recently as March 11, the S&P 500 was on pace for the most down days in the first quarter in the last 100 years! The subsequent rally was so persistent it moved Q1’22 out of the top 10.

As we reviewed the state of price trends after March 11th, it became evident that the most tactical variations of our strategies would be headed for their maximum level of defensiveness at the asset class level if current conditions held. We were beginning to gear up and prepare to put this into motion at month-end. U.S. equity prices had followed international stocks into downtrends across the timeframes we focus on. Real estate was joining in the downtrend party as well. Bonds were once again failing to provide any reliable diversification benefits, and were arguably some of the worst performers.

To be clear, as of two weeks ago, we were preparing for a potential scenario of minimum equities and maximum allocations to ULTRA-short-term fixed income instruments. That’s about as defensive as we can be. Then a funny thing happened that is typical if you follow markets closely. Without warning, things began to reverse course.

Fast forward to today, and not only have the imminent long-term downtrends disappeared (for the time being) for U.S. stocks as an asset class, but intermediate-term trends have also strengthened and entered uptrends.  This trend change objectively directs an increased exposure to U.S. stocks and real estate for April and a reduced allocation from ultra-short-term fixed income.

Now let us repeat (in bold) another sentence we stated last month.

The solution, in our view, is that we must constantly remind ourselves that no one knows exactly what will happen next in the investment markets.

People often mistakenly assume that the reason some investors outperform others is related to the exact parameters of the investment process itself – that there are only a few BEST processes out there, and you must find the diamond in the rough. We think it is less about the exact process and more about: having the humility to know that you don’t know the future, eliminating emotional reactions to world events, and staying disciplined about following the process consistently (even when it’s hard or even when outsiders might look at you with a raised eyebrow). When you combine a good process with these psychological ingredients, long-term results tend to go from good to great.

David Childs, Ira Ross, and Eric Warren

Spartan Planning

Disclaimer: this note is for general update purposes related to the strategy and approach of Spartan Planning portfolios. Every client’s situation including Risk Profile, Time Horizon, Contributions, and Distributions is different from other clients. Your particular exposure to any given asset class will depend on your goals, risk profile, and how tactical or passive your risk profile calls for. If there have been changes to your risk profile and/or goals or if you wish to discuss them in more depth please contact your advisor. This email and the data herein is not a solicitation to invest in any investment product nor is it intended to provide investment advice. It is intended for information purposes only and should be used by investment professionals and investors who are knowledgeable of the risks involved. No representation is made that any investment will or is likely to achieve results comparable to those shown or will make any profit at all or will be able to avoid incurring substantial losses. While every effort has been made to provide data from sources considered to be reliable, no guarantee of accuracy is given. Historical data are presented for informational purposes only. Investment programs described herein contain significant risks. A secondary market may not exist or develop for some investments portrayed. Past performance is not indicative of future performance. Investment decisions should be made based on the investors specific financial needs and objectives, goals, time horizon, tax liability, risk tolerance and other relevant factors. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Investors should consider the underlying funds’ investment objectives, risks, charges and expenses carefully before investing. The Advisor’s ADV, which contains this and other important information, should be read carefully before investing. ETFs trade like stocks and may trade for less than their net asset value. Spartan Planning Group, LLC (“Spartan” or the “Advisor”) is registered as an investment adviser with the United States Securities and Exchange Commission (SEC). Registration does not constitute an endorsement of the firm by the SEC nor does it indicate that the Adviser has attained a particular level of skill or ability. Indexes are unmanaged and do not incur management fees, costs, and expenses. Spartan’s risk-management process includes an effort to monitor and manage risk, but should not be confused with and does not imply low risk or the ability to control risk. There are risks associated with any investment approach, and Spartan strategies have their own set of risks to be aware of. First, there are the risks associated with the long-term strategic holdings for each of the strategies. The more aggressive the Spartan strategy selected, the more likely the strategy will contain larger weights in riskier asset classes, such as equities. Second, there are distinct risks associated with Spartan Strategies’ shorter-term tactical allocations, which can result in more concentration towards a certain asset class or classes. This introduces the risk that Spartan could be on the wrong side of a tactical overweight, thus resulting in a drag on overall performance or loss of principal. International investments may involve additional risks, which could include differences in financial accounting standards, currency fluctuations, political instability, foreign taxes and regulations, and the potential for illiquid markets. Investing in emerging markets may accentuate these risks. Diversification strategies do not ensure a profit and do not protect against losses in declining markets