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Asset Performance and the Business Cycle

Traditional investment theory suggests there are four phases in the business cycle: expansion, peak, contraction and trough.

 

During the contraction phase, the economy is often considered to be in a recession.

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You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready, you won't do well in the markets.

                                                         - Peter Lynch

 

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FIN-DEFCON®

 

Over time, some of the most dramatic declines in portfolio values were experienced during economic recessions. Our Financial Defensive Condition (FIN-DEFCON®) strategy attempts to identify economic trends that have preceded past U.S. economic recessions and recoveries, and then use this information to influence asset allocation decisions.

 

Asset allocation is a term used to describe how investments are distributed among different asset classes, such as fixed income or equities. However, asset allocation cannot guarantee a profit or protect against loss. 

 

The goal of the FIN-DEFCON® strategy is to influence Dynamic Asset Allocation changes and improve long-term portfolio performance relative to a Strategic Asset Allocation (Buy and Hold) strategy and the “Optimal Risk Portfolio in the Single-Index Model” formula widely recognized in academic research: 

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The FIN-DEFCON® alert system employs terminology similar to the United States’ Armed Force's Defensive Readiness Condition (DEFCON) system.  FIN-DEFCON® is a proprietary strategy developed by Gerald Steffes, CPA, CFP®, AIF®, with Steffes Financial, Ltd, in Overland Park, Kansas. Patent pending 17/026,827. See important disclosures under the Disclosures Tab.

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When the market goes up and up, everyone looks like an investing genius. It's only when things go sour that you see who actually has a good long-term strategy.

                                               - Warren Buffett

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