DENVER - Even when the long-term market trend is defined by falling inflation-adjusted prices, despite short-term ups and downs, there may be opportunities to root out profits.
In such a scenarioa secular bear market, as its calledthere are ways to profitably allocate a portfolio, says Martin Pring of Pring Turner Capital Group who spoke at the annual conference of the National Association of Active Investment Managers on Monday.
Pring is currently only bearish on bonds. We are in the fourth stage, or season, of a six stage business cycle, according to Prings research. That means hes bearish on bonds and bullish on equities and inflation hedge commodities.
On average, Pring says, stage four of a business cycle lasts six and a half months. As you progress through a business cycle, different asset classes come into play and there are certain things you want to be exposed to.
Pring Capitals investment strategy focuses on business cycles which average 4-5 year spans. As the economy contracts in stage one, the model is bullish on bonds. As it moves into stage two and bottoms out, equities are purchased. As the economy turns around, commodities come into play.
The expansion of the economy dictates the exact opposite approach: selling bonds in stage four as the economy expands, then selling stocks in stage five as the expansion peaks and finally selling commodities in stage 6 when everything turns down bearish on all three asset classes.
Pring recently teamed with AdvisorShares to put this strategy to work in an exchange traded fund, DBIZ, launched in December 2012. But if advisors choose to take a do-it-yourself approach to Prings strategy instead, he says advisors can use the 12-month moving average as their guide. Its a simplistic way of demonstrating a bull or bear market and what stage of the business cycle were in, he says.
And though Pring says that having confidence in this model takes some of the subjectivity out of investing, something that is inherently emotional and subjective, he acknowledges that it is not the holy grail. There are times when it doesnt work, he says.
Nevertheless, Pring would caution advisors about a set it and forget it strategy. Every time you see a bear market, people start to look for something else, Pring says. By the time theyve all realized buy and hold doesnt work work, well be entering a secular bear market, thats typically what happens.
Register or login for access to this item and much more
All Financial Planning content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access