Dear Spartan Client,

“A military genius is the man who can do the average thing when everyone else around him is losing his mind.” –Napoleon

What an amazing time to be an investor. A roaring stock market at all-time highs, historically low interest rates, housing prices soaring, and a meme-based digital currency called Dogecoin with a market cap greater than companies such as Ford, Marriott, and Walgreens. Who could ask for more? Asset prices are increasing at such a fast pace everyone seems to be talking about bubbles.

One concern we often hear is, “If bubbles are ‘bad,’ shouldn’t I reduce my exposure to them?” If you have a risk-managed strategy, like we do, this is the wrong question to be focusing on. If your goal is to keep your rate of compounding at or near its highest point, it’s precisely these periods that help you accomplish this. 

In this month’s note we discuss the “melt up” in stock prices and how a systematic strategy like ours reacts in such conditions. We draw on the analogy of a golf swing to make the point that repeatability is as vital in investments as it is on the course. “Trusting your swing” not only gives you confidence but also allows you to remain calm without overthinking.

But before we dive deeper, below are the asset classes utilized in our portfolios and their model-driven exposure headed into May.

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 May, 2021

U.S. Equities: Decreasing exposure in Growth and Moderate Growth Strategies by returning a portion of the allocations to TIPS. Balanced and Conservative Strategies will not change. Rising trends remain across both the intermediate- and long-term timeframes.

International Equities: No change to exposure, which is at its baseline allocation, with uptrends remaining across both timeframes.

Real Estate: No change. Exposure is at its baseline allocation, with uptrends in both timeframes.

Intermediate-Term Fixed Income: No change. Exposure remains at its baseline allocation due to continued downtrends for both domestic and international bonds.

Inflation-Protected Bonds: Increasing in all strategies with full uptrend established.

Short-Term Fixed Income: Unchanged in Growth and Moderate Growth Strategies, but decreasing in Balanced and Conservative as it returns allocations to TIPS. Trends over both timeframes remain down.

Alternatives: Unchanged as both trend timeframes continue to be down.

Asset Level Overview

Equities and Real Estate

Like the first three months of 2021, U.S. equity returns opened strong in April, on their way to a fourth straight monthly increase. Unlike each month of the first quarter, the push higher remained consistent without any retracement in the second half of the month. In addition to consistency, the increases were broad, with all market cap levels and sectors benefiting in much the same way.

Internationally, the rise in equity markets was not quite as great as in the U.S., but was still significant. Developed markets outpaced their emerging counterparts. The result is solid uptrends across all timeframes, both domestically and internationally, with no immediate signs of that changing.

Fixed Income and Alternatives

Besides inflation-protected bonds (TIPS), all fixed income classes we monitor remain in downtrends and at minimum allocations despite slight price increases in April. As expected, given the pressure for consumer prices to rise, TIPS have been able to reverse the intermediate-term downtrends from March, resuming a rising trend over this timeframe. The result for our portfolios is an increasing allocation to TIPS, back to overweight, as it also continues to hold exposure vacated by other fixed income sectors.

In the alternatives bucket, gold produced positive results in April, but not enough to reverse previous downtrends. The allocation remains at its minimum with this exposure handed to equities. One more positive month from gold could be enough to cause an increased allocation heading into the summer months.

Three potential macro catalysts for the recent trend changes:

  • Bubble Talk: Markets for just about everything are soaring, which in turn is stirring up the financial media, which is questioning whether global markets are in a bubble. Rarely have so many assets been up this much at once.The price of lumber is more than 100% higher today than its 50-year high set in 2018, which you have certainly noticed if you tried to do any home improvement projects recently. Residential home sales in the U.S. are at levels last seen in 2006. The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, rose 12% in the year that ended in February, up from an 11.2% annual rate the prior month.  Stock indexes have been hitting fresh all-time highs regularly this year as well.The increases have extended beyond conventional markets. Bitcoin touched $65,000 for the first time this month, before pulling back. Copper is near its highest level in 30 years. Corn is up more than 100% in nine months, along with significant rallies in wheat and sugar.
  • Consumer Confidence: With the country reopening and the market uptrends discussed already, U.S. consumer confidence in April jumped to the highest level since the COVID-19 pandemic hit. The Conference Board’s monthly index rose for the fourth straight month as more people received vaccinations, stimulus payments reached households, and employers added jobs. We are not yet back to pre-pandemic highs, but consumer confidence has strengthened.
  • Central Bank: The Federal Open Market Committee released a statement Wednesday and acknowledged inflation has risen, which they attributed largely to transitory factors. While economic activity and employment have strengthened, the FOMC doesn’t believe they are at levels warranting an end to easing. As such, the FOMC will continue to buy $80 billion in Treasuries and $40 billion in mortgage-backed securities per month, and will keep the Federal Funds rate unchanged.

The Melt-Up Continues

Stock indices across the spectrum – large caps, mid caps, small caps, high-dividend payers, value, and real estate, to name a few – are all up double-digits for the year. Other major equity segments, such as international and growth stocks, are also moderately positive both in April and year-to-date. With so much positive performance in such a short amount of time, it could be very easy to embrace the adage, “sell in May and go away.”

Stay in May

With trends up and volatility low, the environment remains favorable for stocks. If 2020 taught us anything, it’s that conditions can change quickly, but again, having a robust system, like ours, to reduce risk (i.e., a good braking system) allows us to still keep our foot on the gas when conditions are supportive.

In order to keep you in the best position in your financial life we hope to capture as much of this upside as we can for as long as possible. This would not be possible without a process for managing downside risk when those negative conditions inevitably arise. Rather than hold large positions in underperforming assets, such as bonds, in the hopes they will recover or add diversification benefits, we continue to lean on our systematic rules, which allow us to remain exposed to better-performing instruments, such as equities.  We are thankful for the opportunity to guide you, not only through the volatility in markets, but the volatility in your life experiences while on the path to the future you desire.  We know that fear can be driven by many different places like headlines, markets, neighbors, and many others, but we are here to help you make sense of what that actually means for you and to help you navigate through to a stress-free financial life.


David Childs, Ira Ross, Blaise Stevens, 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