Time for Active Management
Most stock portfolios today are manged with a "buy and hold" approach — what we call passive portfolio management. A typical portfolio is designed to replicate an index such as the S&P 500. Most investors didn't really choose that approach, but here they are, usually by default.
But, given today's extreme valuations and growing market instability, the timing couldn't be worse.
Sadly, this "buy it and forget it" approach to investing for retirement is actively enouraged by the Federal Goverment, financial academics, and, of course, by the giant Wall Street banks and, most likely, your advisor.
Tracking the
Big Ten
The mechanical implementation of passive portfolio strategies is creating poorly understood feedback loops that significantly distort the market value of the largest ten mega-cap companies.
As a group, we label these issues the Big Ten, and their performance dominates retirement portfolios today. They've done extremely well for the last ten years, but that is not likely to continue.
The problem is the growing disconnect between price and value for these issues, one that is becoming a threat to the viability of the financial system. Really.
Your investment strategy needs to monitor and manage this threat . . .
The KP Trend Model is a seasoned "regime filter" that identifies the underlying trend condition of US equities markets.
After shifting several times between Yellow and Green in the last four months, the Model turned conclusively Green on April 8.
Previously, he Model had been in Green status for an almost all of 2025 (86% of all trading days).
The Green regime condition sits in a class of its own, ruling over 54.5% of all market days over the past 27 years. During those Green periods, the S&P 500 has risen by an annualized total return of +18.5% and a Sharpe Ratio of 1.46. See the graphic in the Charts section below.
Looking for the Next Black Swan
The performance of your retirement portfolio is dominated by market trends, not by individual investments.
While equity markets have generated positive returns over the long term, they also experience upredictable and hghly disruptive crashes. These events severly reduce long-term performance and, more important, usually trigger counter-productive reactions from investors.
Anticipating Black Swans is a subtle, challenging undertaking, as we would expect when so much is at stake. But even a partially successful effort to identify precursors of the next major crash can significantly reduce portfolio volatility and your portfolio's exposure to a significant drawdown . . .
