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Posted by Lance Roberts - X-Factor Report

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Full-Market-Cycles

This past week, I penned a piece entitled “You Think Like A Bear But Invest Like A Bull?” that discussed the disconnect between my writings and the “Bullish” posture of the portfolio. To wit:

This past week, I penned a piece entitled “You Think Like A Bear But Invest Like A Bull?” that discussed the disconnect between my writings and the “Bullish” posture of the portfolio. To wit:

However, when that reversion process occurs is anyone’s guess.

Therefore, while the analysis suggests that portfolios should be heavily underweighted ‘risk,’ having done so would have led to substantial underperformance and subsequent career risk.

This is why a good portion of my investment management philosophy is focused on the control of ‘risk’ in portfolio allocation models through the lens of relative strength and momentum analysis.

The effect of momentum is arguably one of the most pervasive forces in the financial markets. Throughout history, there are episodes where markets rise or fall, further and faster than logic would dictate. However, this is the effect of the psychological, or behavioral, forces at work as ‘greed’ and ‘fear’ overtake logical analysis.

I have discussed the effect of ‘full market cycles previously as shown in the chart below”

Full-Market-Cycles

 

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