The 60% Equity, 40% Fixed Income portfolio has long been a staple for portfolio asset allocation across investor types for decades. The iShares Core Growth Allocation ETF (AOR, 60% Equity, 40% Fixed Income target) provides investors with a reliable proxy that can be utilized within Intermarket relationships to evaluate strength between asset classes outside of equities and fixed income. In this note, the relative strength of the 60/40 proxy (AOR) is compared to proxies for Commodities, Alternatives, and Cryptocurrencies.
60/40 (AOR) Relative to the Bloomberg Commodity Index
The 60/40 proxy (AOR) broke key relative support below the ratio’s declining 50-day moving average at the highlighted zone over the past week of trading, leaving the door open for a test of the June relative lows. It’s important to note that Commodities have been unexempt from the selling pressure as of late, and this relationship continues to suggest that Commodities have been a “less bad” asset class. While RSI has not been oversold since June, the series of lower highs in the indicator gives credence for yet another potential leg down.
60/40 (AOR) Relative to Multi-Strategy Alternatives (QAI)
The 60/40 proxy (AOR) continues its descent relative to Multi-Strategy Alternatives (QAI) after breaking relative support at the highlighted zone and the June relative lows over the past month of trading. The sheer distance between the relationship and the ratio’s declining 50-day moving averages leaves the door open for a potential countertrend rally, but the bias remains with the bears. RSI confirms the downtrend as it tests the upper bound of a bearish regime. Note the inability to achieve an overbought reading and complete a bearish to a bullish reversal in the summer; it will likely take time to repair the damage here as Alternatives take the lead.
60/40 (AOR) Relative to Top 3 Cryptocurrencies by Market Capitalization
After a strong run from the fall of last year into the summer, the 60/40 proxy (AOR) continues trading in consolidation relative to the top three cryptocurrencies (Bitcoin, Ethereum, and Tether). The relationship is fighting with the ratio’s rising 50-day moving average as it struggles to gain a directional bias. Bulls will look for the consolidation to resolve to the upside, while the bears will look for a breakdown from the relative trading range. While the 60/40 has struggled relative to other asset classes, given the current market environment, it has held up well relative to the top three cryptocurrencies by market capitalization. Bulls with cite the inability of RSI to become oversold over the past year, while the bear will note the series of lower highs and waning momentum in the relationship since the summer. In either case, investors will look for a resolution from the relative trading range to have confidence in the trend.
Potomac Fund Management ("Company") is an SEC-registered investment adviser. SEC registration does not constitute an endorsement of the advisory firm by the SEC nor does it indicate that the advisory firm has attained a particular level of skill or ability. This information is prepared for general information only and should not be considered as individual investment advice nor as a solicitation to buy or offer to sell any securities. This material does not constitute any representation as to the suitability or appropriateness of any investment advisory program or security. Please visit our FULL DISCLOSURE page. The company does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to the Company website or incorporated herein, and takes no responsibility for any of this information. The views of the Company are subject to change and the Company is under no obligation to notify you of any changes. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy will be profitable or equal to any historical performance level.