I want to update our members on two changes that we are making with respect to these two strategies.
First, SMI's "Bear Alert" (BA) indicator is alive and well. (Those unfamiliar with the BA can learn more here.) It's designed to sound an alarm if the market sells off to such an extent that history favors a bear market in the near future. We continue to track it weekly, but with the market repeatedly setting new highs in 2014, it hasn't come close to triggering a warning.
Because bear-markets are few and far between (for which I'm thankful!), we've not reserved a permanent space for the indicator on our new site. Instead, we will simple publish an article letting you know when the BA is in play, or if things move quickly, has actually sounded. With the S&P 500 setting another closing high in early December (at 2,075.37), the market is only off about 4% from that high, even after the weakness of the past few days. We've a long way to go before a BA alert is triggered. But when that happens, our announcement and commentary will appear on the home page in the Recent Articles section.
Second, we're discontinuing the Emerging Markets piece of our Optional Inflation Hedges strategy. It was initially included more as an "outside the dollar" holding than for its anti-inflation benefits. Whereas the remaining three holdings—gold, real estate, and energy—should all rise with U.S. inflation, Emerging Market funds may or may not do so. That piece was included strictly as a way to escape a failing U.S. currency.
Given the strength of the dollar and the shift from inflationary concerns to deflationary ones, the entire OIH strategy actually seems unnecessary at present. As Mark pointed out in a recent article on OIH, "Our thinking regarding OIH has changed somewhat since the introduction of Dynamic Asset Allocation in January 2013. Rather than having the 'always on' inflation insurance that OIH provides, we think DAA offers smarter inflation protection by only applying it as needed."
However, for those who continue to be concerned/interested in having a specifically targeted hedge against the possibility of inflation returning, we'll continue to post recommendations for now for the three sectors that seem the most inflation-sensitive. Those who wish to continue following the Emerging Markets segment can do so in the monthly Fund Performance Rankings.