We incorporate a long/short book based on the macro – economic outlook provided by our investment research teams.
There are 4 macro – economic climates and based off of these 4 environments we will be more risk on or risk off. Here are our philosophies given various climates:
GDP Accelerating & Inflation Decelerating: Risk on balanced
GDP Accelerating & Inflation Accelerating: Risk on aggressive
GDP Decelerating & Inflation Accelerating: Risk on invested in inflation hedges
GDP Decelerating & Inflation Decelerating: Risk off; US Dollar biggest allocation
Based on above, there are certain sectors to invest in and certain asset classes will outperform. We rely heavily on our price action algorithms to indicate when to get in and out of sectors and asset classes, but the following is a macro overview of what the top performing hedge fund, family offices, and investment firms utilize such as us.
We typically will only short stocks if you fit that investor profile goal when GDP is decelerating, and inflation is decelerating. These have occurred recently in 2018; 2020; 2022.
The ability for us to do this is unique because most big firms have too many conflicts of interests such as shareholders, and publicly traded stock in their own companies thus don’t allow them to short anything.
This is a general framework. Based on your investment objectives Boracchia Wiviott Wealth Partners may incorporate a variety of stocks but the rules remain the same. Diversification and sound risk management practices lowers the overall volatility of your investment portfolio while enhancing the performance of your investment portfolio when back tested against static non – dynamic investment approaches. Our price action algorithms also perform better than a static buy and hold strategy.
We keep our investment portfolios between 30-60 stock or bond positions. Each of the following are for 1 stock ticker:
Currencies: 12% –
For example, US Dollar (UUP). If the price action is bullish trade (20 Days) and trend (90 days) will have a max long position of 12% of portfolio. This happens when GDP is decelerating and inflation is decelerating. This happens when the stock market is bearish and selling off like all of 2022.
Fixed Income: 10% –
For example, Investment Grade Corporate Bonds (LQD). Max long in a GDP accelerating inflation decelerating
Equity ETF: 6% –
For example, Russell 2000 (IWM) performs best in GDP accelerating and inflation accelerating
Individual stock: 2%
Google (googl)…best performs in gdp accelerates inflation decelerates
Commodity: 4% –
Gold (Gld); GDP increases inflation decreases
Reasons for us to sell a position:
If the stock breaks trend.
Or if the stock sells off 12%. When the trade goes neutral, we sell 25%. And if it goes bearish trade, we sell another 50% of position.
We buy and sell in increments of Basis points (1/100th of a Percent) to build a position.
Usually when starting a position, we will start with a minimum position which is roughly 33% of our max…and based on the market price action will buy and sell based on our price action data range. If the stock is overbought, we will sell some locking in gains or if the stock is oversold we will buy some taking advantage of the underlying stock volatility.
To be able to invest properly in today’s stock market our strategy is the best way to maximize gains while reducing volatility. We will never be perfect, but our goal is to incorporate a sound risk management investment philosophy along with your investment objectives.
Information is subject to change.