Control What You Can, Remove the Rest

“Grand strategy is the art of looking beyond the present battle and calculating ahead. Focus on your ultimate goal and plot to reach it.”

–Robert Greene, “The 33 Strategies of War”

When someone asks us to describe our investment strategy, often the result is a conversation that’s less about strategy and substantially more about tactics. The two are complimentary and incredibly important, but they are certainly not interchangeable. A great goal or strategy without proper tactics is worthless. Likewise, surgically executed tactics without an overarching goal or strategy (“the why”) aren’t of value either.

To us, the main difference between strategy and tactics is in the goal you are trying to achieve and the timeframe by which you measure success, or recognize failure. Generating a comprehensive understanding of an investment strategy requires answers to three questions: 

What is the goal? 

How can we achieve the goal? 

What is a reasonable timeframe of observation for determining success or failure? 

Strategies operate in an inherently longer timeframe than tactics, but on a daily basis, we feel the tactics more. For instance, it’s easy to lose sight of a long-term diet plan when you’re sitting in a Krispy Kreme store (how easy it is to go from “just one” to “just one dozen”).

The goal of our strategy is simple: keep an investor’s rate of compounding at or near its highest point as often as possible. The tactics used to successfully implement that strategy involve agility in changing exposure to uptrending investments based on observable trends.  Although the strategy remains constant, the tactics may dictate a radical change in investments.  The positioning difference between 2021 and 2022 is a great example of this. 

In this Monthly Note, we consider both the bull and bear case for equities. We also highlight why our focus remains on controlling what we can by maintaining a disciplined, systematic investing process. In our view, focusing on a repeatable process and not short-term outcomes is how we will guide you toward the long-term strategic goals for your financial life. 

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

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 static your risk profile calls for. Adjustments can vary across strategies depending on each strategy’s objectives. What’s illustrated above most clearly reflects allocation adjustments for the Growth Strategy. 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.



Equities & Real Estate

Despite a crisis that shut down multiple banks and threatened many others, large-cap U.S. equities managed to produce a small but respectable gain in March. Given most of the banking stress focused on middle- and small-sized names, perhaps it is no surprise that mid and small-caps as a whole fared much worse, resulting in significant decreases. 

Interestingly, growth and technology led the way domestically while value, which generally has exposure to financial firms, underperformed. 

As a whole, U.S. equities barely retained their intermediate-term uptrend status and continue to experience downtrends over the long-term timeframe. As a result, our portfolios continue to be underweight the baseline target.

Similar to U.S. stocks, international equities experienced a roller coaster but ultimately ended March near where they started for the month. Foreign Developed markets managed to hold their uptrends across both timeframes while emerging markets remained in downtrends. Since developed markets remain much stronger, our portfolios are tilted in that direction. In fact, developed markets maintain their maximum allocation, with emerging markets at their minimum.

Real estate securities continue to experience downtrends across both timeframes. In fact, they nearly repeated the 2022 low. A bounce in the last few days has created some distance from that low. Despite the uptick heading into April, this asset class remains arguably the weakest right now and in our portfolios remains at or near its low.

Fixed Income & Alternatives

Bonds have joined equities in a largely see-saw pattern by following February’s retracement with a rally in March. While not enough to even break the 200-day exponential moving average, the increases caused an intermediate-term uptrend. The result in our portfolios is an increased exposure, yet still below the baseline allocation both in the U.S. and internationally.

After declining for almost all of February, gold staged a powerful rally in March, making a new 2023 high and producing strong returns. This asset class sits near a 1-year high and continues to hold its uptrend status across both timeframes we monitor. All our portfolios are at their maximum allocation, and that will not change for April.

    Three potential catalysts for trend changes:


    • Last Hike?:  The Federal Reserve approved another 0.25% rate increase but signaled that recent banking-system turmoil might end its rate-rise campaign sooner than expected. The decision marked the Fed’s ninth consecutive rate increase and brings the benchmark federal funds rate to a range of around 4.75%-5%, the highest level since September 2007. Fed Chair Jerome Powell indicated that credit tightening from banks may further slow the economy and allow the Federal Reserve to pause on rate hikes in upcoming meetings, as they assess the damage done by recent banking failures.
    • Pointing Fingers About Bank Collapse:  Senators criticized the Federal Reserve for failing to prevent the collapse of Silicon Valley Bank despite identifying risks beforehand. The central bank’s top regulator blamed the bank’s executives for not fixing its problems. The Fed’s Vice Chairman for Supervision, Michael Barr, appeared before the Senate Banking Committee and defended the actions of the Fed’s supervisors. He indicated that the central bank had privately raised concerns with SVB before its collapse.
    • Inflation Abating:  U.S. consumers were less worried about inflation in February than in January. According to a recent survey by the New York Federal Reserve, expectations for price increases over the coming year fell to 4.2% from 5% a month earlier. They are down from a high of almost 7% in 2022. Three-year-ahead expectations held steady at 2.7%, down from a peak of 4%. Fed officials want to keep inflation expectations anchored close to their 2% goal, with some worrying that high and rising forecasts could become a self-fulfilling prophecy. Inflation is a measure the Fed tracks closely for setting the base Federal Funds rate.

    The Bear Case & Bull Case for U.S. Equities

    “There is a call for strategy every time the path to a given destination is not straightforward.”

    Lawrence Freedman, “Strategy: A History”

    #1 – The Bear Case:

    The case for declining equity markets is based on three historically sure-fire ingredients for a lasting bear market: rising interest rates caused by inflation, financial instability, and tightening credit. Even one or two of these factors has historically been a catalyst for economic and equity market weakness, so all three happening simultaneously is concerning. 

    While the growth rate of inflation has steadied, it remains stubbornly high despite substantial rate hikes thus far. Employment and wage growth remain strong, leaving little room for hope that price declines on key inputs are imminent. The Federal Reserve has made it clear that fighting inflation is its number one priority, and essentially the only tool at its disposal is interest rates, so rates will likely continue higher and remain that way for a long time. 

    Point 1.

    The financial sector was arguably in a freefall during March, with the S&P 500 Financials Sector SPDR ETF (XLF) declining about 12% for the month, with a low of almost -15%. Emergency government meetings have convened to rescue multiple banks, while scores of others have endured runs on deposits and sharp stock price declines in recent weeks. Comparisons with the Financial Crisis have been common, as this has been the worst stretch of bank instability since 2008. 

    Point 2. 

    With the public nervous about the banking system, what is the likely behavior from bank leaders? The answer is tightening credit. As scrutiny of bank balance sheets escalates, it is reasonable to assume that lending standards will stiffen until sentiment improves. Reduced access to capital impedes growth, which becomes another headwind for economic growth.

    #2 – The Bull Case:

    But, markets are discounting machines. What do we mean by that? 

    The markets have historically been forward-looking. In the past, you’d hear a few stories of market participants who were able to identify inefficiency, exploit it, and profit profoundly – but those were the exceptions, not the rule. 

    The advent of algorithmic trading and instantaneous execution has made profitably exploiting market inefficiencies even more difficult in the traditional sense. Market participants today are reacting to market changes almost as soon as they occur, leaving virtually no room for exploitation.

    In general, if one is witnessing and reacting to a financial event, the assumption should be that the markets have already done so prior, and the opportunity is gone.

    Why does this matter right now, and how does that make a case for a bull market?

    The answer lies in market behavior since the last all-time high in U.S. stocks in December 2021. The markets spent 2022 pricing in the bear case presented above. High inflation, interest rate hikes, tightening credit, and a recession were progressively priced in with a few false rallies popping up when the hope of a soft landing ebbed and flowed. The pattern was a lower high followed by a new low.

    In 2023, U.S. markets broke this pattern and broadly formed a series of higher lows. Cost reductions and more sober revenue expectations pushed growth stocks to resume their leadership after experiencing a healthy retracement in 2022. Additionally, the speculative fervor in digital assets has been squashed, bringing some normalcy back to investor expectations. 

    The fact that material bank issues have done little to alter this pattern of higher lows is arguably the strongest bull case of all. Investors are largely seeing this for what it is – a few banks paying the price for reckless decisions. Sadly, these types of situations have routinely existed and will likely continue.

    There’s a solid argument to make about markets having already priced in all the bear scenarios. With the worst seeming to be behind us regarding inflation, rate hikes, and banking issues, the markets may be slowly weeding out the remaining bears. In the absence of selling, the markets naturally tend to climb. If we’re about to climb, you want to be on board or get on board.

    The Conclusion:

    It’s amazing how easy it was for us to articulate those two cases. Yet, as we conclude writing this Monthly Note, we’re still conflicted about which case is more or less true. This is always the struggle – competent financial professionals should nearly always be able to make strong cases for either side of the future direction of markets. If you couldn’t, that means the market is very mispriced and arbitrage experts would come in and “fix the price inefficiencies.” 

    The beauty of our systematic investing process is that we don’t have to make a prediction and just ride it out:

    • We didn’t know how good things would be in 2021, and it didn’t stop us from capitalizing on it.
    • We didn’t know how bad things would be in 2022, and it didn’t stop us from being defensive for most of the year – especially as markets made new lows and held their downtrend direction. 
    • We don’t know what remains in store in 2023, and it won’t stop us from continuing to follow our process. 

    Our trend-following systems will continue to adapt to reality like they always have. They’ll seek to put us in a strong position to avoid excessive downside risk or seek opportunistic areas of strength, whichever is most appropriate for the market conditions ahead of us. 

    Having to chain yourself to one of the scenarios above, and hoping you’re right, is a scary place to be. Systematic investing removes reliance on the things you cannot control. What is left are factors that can work to your advantage. This is our belief and why we do what we do for your financial life.


    David Childs, Ira Ross, and Eric Warren

    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