What's become increasingly clear to me is that the stock market could continue to be range bound for quite some time. Although no one can foretell the future here are a few thoughts to ponder. The balance sheets of U.S. corporations, excluding some banks and other financial institutions, seems to be strong—lots of cash and not much debt.
However, with the backdrop of our nation’s fiscal policy, the European debt crisis, the slowdown in the emerging markets, the nagging uncertainty among corporate CEOs and the lack of confidence among American consumers, I wouldn't expect stocks to embark on any sustained upward trend for a while. In fact, I believe the more likely scenario is to the downside, though I would not venture a guess as to how far. With this paradigm, I've found that increasing the number of alternative investments is a much more pragmatic approach.
In my blog last week, I wrote about five of my favorite alternative investments. This week I'd like to finish the list of alternatives vehicles that I use.
Absolute Strategies (ASFIX)
This is one of my favorite funds, although it is currently closed to new advisors (a soft close). This fund is sub-advised by a collection of well seasoned managers. Some of the asset classes in ASFIX include: distressed equity; long short; global long-short; dollar neutral long-short; convertible arbitrage; and others. I have been using this fund for over three years and have been very pleased. Again, unless you have a position with this fund (as an advisor), it is not available.
Greenhaven Commodity Index (GCC)
This ETF has been a top-tier performer within its peer group. I exited all commodities a few weeks ago based on my belief that a global slowdown is bad for demand and for commodities. However, GCC is worth considering.
Hussman Strategic Growth (HSGFX)
This fund invests primarily in U.S. stocks, with the objective of long-term capital appreciation, and places added emphasis on defending capital during unfavorable market conditions. HSGFX is included in Morningstar's Long-Short category.
Rydex Managed Futures (RYMFX)
This fund is designed to track the S&P Diversified Trends Indicator. This index had a period of impressive performance in the aftermath of the tech bust. However, it has been down over the past few years. That said, I believe it will reemerge and so I will continue to allocate a small portion to RYMFX.
To summarize, out of 21 total funds in an average client portfolio, nine are in the alternative category.
Have a great week!