Allocation History

Cabana’s Allocation in Response to the Economic Cycle

• Scene

  Broad Themes

• Bullish

  Typical of an uptrend within a cyclical bull market cycle. Equities of all types generally outperform. Fixed income and dividend paying assets may also be attractive as a hedge or to complement equities in a stable interest rate environment.
• Cautiously Bullish (Deteriorating)

  Typical of a pullback within a cyclical bull market. Defensive equity sectors as well as fixed income and dividend paying assets may outperform higher beta risk assets.
• Bearish

  Typical of a cyclical bear market whereby corporate earnings growth is contracting and stocks have entered a sustained downtrend. Monetary conditions may tighten, and credit spreads widen as risk becomes elevated. Fixed income assets such as corporate grade bonds and treasuries are attractive for yield and minimized credit risk. The US Dollar and gold may also be attractive during bear market conditions. Value and Defensive equities such as staples and healthcare typically outperform growth assets.
• Safety Valve

  The Safety Valve represents Cabana’s backstop in the event of rapid price decline or another unique event. Holdings selected are appropriate during times of sudden or excessive market drawdown. These include U.S Treasuries, gold and the U.S. dollar, among others. This trigger overrides the normal operation of the first five scenes in the event of benchmark market declines beyond a predefined limit, resuming normal operation when the basic five-scene model transitions upward (to a more bullish scene) or when an upward market trend is signaled. It seeks to protect against periods of unusual market conditions, including convergence of asset class correlation, unforeseen economic shock, or other black swan events. In this way, the Safety Valve is intended to complement Cabana’s “target drawdown” optimization during times when excessive drawdown is threatened or has occurred.
• Transitional Bearish (Improving)

  This scene represents the typical uptrend within a larger, cyclical bear market. Income producing assets, including preferred stocks, corporate grade bonds and dividend paying large cap equities are attractive. Higher beta growth stocks may also do well as this scene may represent the beginnings of a new bull market.
• Transitional Bullish (Improving)

  Typical of a bull market cycle resumption following a correction or bear market. Higher beta risk assets, including small- and mid-cap equities, as well as technology may be attractive and outperform fixed income assets such as treasuries, bonds and preferred stocks.

*All investments carry a degree of risk. Scenes assigned as per the judgment of The Cabana Group. Scene names and number of scenes have changed over time.

Repeating Economic Cycle

* Markets are a leading indicator (within 6 to 8 months) of the economic cycle, which is considered when determining the asset allocation.