The Logical-Invest newsletter for May 2024

S&P 500: Did we reach the top?

The S&P 500 had its first month of decline in April 2024, with a -4% loss. Gold was up +3% while TLT lost -6.4%.

Most of our standard strategies had smaller losses, about half of the S&P 500, due to the way we hedge all our strategies.

Defensive mode

May has arrived, which means summer is just around the corner. Historically, May can be a tricky month for investors – remember the old saying, “sell in May and go away”? While selling everything might not be the answer, it could be a good time to consider hedging your equity exposure.

Hedging Equity Exposure: Our Hedge sub-strategy

We have a dedicated strategy designed to reduce equity risk in most of our portfolios. Just like we carefully choose different types of equities (U.S., foreign, etc.), we use this sub-strategy to select the best safe assets for hedging. Instead of sticking to one option like bonds or gold, we might use a mix of safe assets.

Last month, for example, our hedge included 40% gold and 60% in a money-market fund (GSY).

Our Hedge component is a key part of most of our strategies, providing essential protection during unexpected market downturns. That’s why, even with SPY falling 4% this month, many of our strategies saw less than a 2% correction.

What you might not realize is that the Hedge sub-strategy can work independently as well. You can combine it with your own stock holdings outside of Logical Invest. For example, if you’re holding AAPL, TESLA, or even SPY for the long haul, you could use the current Hedge allocation as inspiration to add some cushioning. And unlike a PUT option, with our Hedge, you won’t lose value over time. Instead, components like GSY earn 4-5% interest, while you still benefit from potential gains with safe-haven assets like gold.

Inflation Update: Agriculture Prices on the Rise

You might not follow commodities like wheat, oats, and rice regularly, but they’re worth watching. In our last newsletter, we discussed how an inflation-focused portfolio performed well over the past year – stocks and gold reached new highs. However, some key agricultural commodities oddly experienced price crashes despite inflationary pressures. Now, it seems they may be starting to climb.

Why does this matter?

While it’s too early to say if this move signals a sustained upward trend or a temporary blip, it hints at an additional inflation stemming from these commodities. It suggests inflation may not be easily controlled, supporting the view that the Fed could postpone rate cuts.

A lack of rate cuts could negatively impact the market, at least in the short term.

We’d love to hear your thoughts in our forum!

The Logical-Invest team.

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NameCAGR 1y ▼
Crypto & Leveraged Top 2 Strategy74.9%
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US Market Strategy 2x Leverage37.9%

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