Time for Active Management
Most stock portfolios today are manged under a "buy and hold" approach — what we call passive portfolio management. The portfolio is designed to replicate an index such as the S&P 500. Most investors didn't really choose that approach, it just happened, usually by default.
But, given today's extreme valuations and growing market instability, the timing couldn't be worse.
Sadly, this "buy it and forget it" approach to investing our retirement savings is actively enouraged by the Federal Goverment, financial academics, and, of course, by the giant Wall Street banksand, most likely, your advisor.
Keeping our Eye on the BigTen
Wall Street's mechanical implementation of passive portfolio strategies is creating poorly under-stood feedback loops that significantly distort the market value of the largest ten mega-cap companies that dominate US equity portfolios.
As a group, we label these issues the Big Ten. They've done extremely well for the last ten years, but that is highly likely to change.
The problem is a growing disconnect between price and value for these issues, and that is becoming a threat to the viability of the financial system. Really.
Your investment strategy needs to monitor and manage this threat . . .
The KP Trend Model is a proprietary "regime filter" that identifies the underlying trend condition of US equities markets.
After shifting several times between Yellow and Green in the last four months, the Model turned conclusively Green on April 8.
Previously, he Model was in Green status for an almost all of 2025 (86% of all trading days).
This Green regime condition sits in a class of its own, ruling over 54.5% of all market days over the past 27 years. During those Green periods, the S&P 500 has risen by an annualized total return of +18.5% and a Sharpe Ratio of 1.46. See the graphic in the Charts section below.
Looking for the Next Black Swan
The performance of your retirement port- folio is dominated by market trends, not by individual investments.
Identifying these trends is hard work, as one would expect. But still, even a partially successful effort to manage the threat of the next "Black Swan" will significantly reduce your portfolio volatility and your exposure to a significant drawdown . . . . .
