Why we remain invested in the U.S. dollar only

Covestor portfolios: Tactical All Asset and Tactical Growth

Bottom Line: Two out of three strategy factors remain bearish. Protection of assets is essential. An allocation of 100% to the U.S. Dollar is recommended.

- Long-Term Stock Pattern (3-5 yrs): Bearish, Lower stock returns ahead

- Intermediate-Term Stock Trend (1 year):  Bullish, Topping stock prices

- Short-Term Stock Volatility (30 days): Bearish, Lower stock prices ahead

- Inflation:

Developed Economies - At or Above Target (except Japan)

Emerging Economies - Above Target

CURRENT ASSET ALLOCATION OBJECTIVE:  PROTECTION

Fundamental, Technical, Trend, & Volatility Indicators

Fundamentally, the S&P 500 is trading at a 21.92 P/E (Shilller approach) as of January 31, a 37% premium over the long-term average of 16. Lower than average returns on stocks over the next 5-10 years are therefore expected.

Strategy Factors

PATTERN: BEARISH; Recent upward stock trends are in the context of a secular bear. Prices should remain below their May 2 highs. Once they start down again, I expect them to reach new lows.

TREND: BULLISH; Stocks have remained above their 200 day moving average since early January. We believe stocks are in a topping process and should start lower soon.

VOLATILITY: BEARISH; The S&P 500 VIX “fear index” closed in bearish territory at the end of January. Prices should remain elevated as stocks continue their topping process.

Strategy

Protection of assets is warranted at this time. An allocation to the U.S. dollar is suitable.  Our Covestor model is nearly fully allocated to the PowerShares DB US Dollar Index Bullish Fund (UUP).

Warm Regards,

Terence P. Grennon

Covestor Ltd. is a registered Investment Advisor. Covestor Investment Management licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for investment models available upon request. Additional important disclosures are available here. For information about Covestor and its services, go to our website, Covestor Investment Management or contact Covestor Client Services at (866) 825-3005, x703.