Time for Active Management
Whether they're aware of it, most stock investors today are enrolled in a "buy and hold" approach — what we call passive investing. And, notwithstanding extreme valuations and signs of instability, passive has become the default strategy for almost everyone.
More troubling is that this "buy it and forget it" approach to investing your retirement savings is enouraged by Congress, financial academics, and, of course, by the Wall Street giants and their advisers.
Buying and holding has become hard-wired into the system. After all, it's worked for over forty years . . .
Keeping our Eye on the BigTen
Wall Street's mechanical implementation of passive portfolio strategies gene-rates poorly understood feedback loops that significantly distort the valuations of the ten largest mega-cap companies that dominate US equity portfolios.
As a group, we label these stocks the Big Ten.
But there's a problem: the growing disconnect between price and value for these issues is becoming a threat to the viability of the financial system. Your portfolio management process needs to monitor and manage this threat . . .
The KP Trend Model is a "regime filter" that seeks to identify the important price trends in of US equities markets.
Identify, not predict.
Effective December 26, 2025, our Model shifted to a Yellow status, having previously re-visited Green for just 24 trading days before the Christmas holiday.
The Yellow condition has characterized the US market environment for 34% of all trading days over the past quarter century.
During those intervals, it has generated a positive annualized return of +10.2%, but with considerably more annual volatility (21%) than the Green condition . . .
Looking for the Next Black Swan
The performance of your retirement port- folio is dominated by market trends, not by individual investments.
Identifying these trends is quite challenging, as we would expect. Yet, even a partially successful effort to manage the threat of the next "Black Swan" can significantly reduce your portfolio volatility and exposure to a significant drawdown . . . . .
