The August 2026 Newsletter
Prepping for the September Reset
The Late-August Mindset
As summer winds down, there is a natural shift in our perspective. Much like students preparing for a new school year, we investors are transitioning from vacation mode to gearing up for Q4. Speaking for myself, coming back to the market this year feels particularly daunting. We are facing a unique set of circumstances that makes navigating the upcoming autumn months difficult.
Currently, we are caught in a macro and valuation dilemma. Equity valuations remain stretched, and while the long-term potential of artificial intelligence is undeniable, there are questions about the immediate return on investment for the massive AI capital expenditures we are seeing. On top of this, geopolitical tensions—particularly the ongoing headlines involving Iran—add a layer of unpredictable risk.
Usually, investors turn to standard safe havens during these times. However, we are seeing (once again) a breakdown in traditional hedging:
- Liquidity contraction: when equity markets experience sharp shocks, liquidity tends to tighten, dragging down assets like Gold right alongside equities.
- Inflation pressures: persistent inflation concerns mean that long-duration Treasuries (TLT) have not provided their historical buffer.
As a result, the SPY/TLT/GLD trio that provides the core basis for an uncorrelated portfolio (and the basis for the Permanent Portfolio) may need more allocation to ETFs like GSY, which is a cash-like, money market position.
This creates a tough dilemma. Staying purely in cash carries the risk of missing out on a fundamental leap in human productivity driven by AI, which should support earnings in the long run. Conversely, staying 100% long in high-beta equities like QQQ exposes portfolios to severe drawdown risks.
When discretionary trading feels like guessing between two bad choices—being overexposed or completely sidelined—we believe it is better to let a model allocate.
The goal of our quantitative strategies is not to predict the future. Instead, they are designed to react to real-time price action, relative strength, and volatility metrics.
To show how this adaptation works in practice, it is helpful to look at how our strategy rules are positioned today. We do not claim these allocations are perfect, but they do offer an objective, mechanical response to current market stress.
HEDGE Sub-Strategy — Currently sitting 100% in GSY, an ultra-short cash equivalent. It has zero allocation to TLT, GLD, or TIPS. The algorithm simply adapted to the reality that traditional bond and gold hedges are not offering clean protection under the current liquidity and inflation conditions.
Top 3 Strategies (MST3) — A prime example of adaptive risk management right now. MST3 is positioned roughly 70% in GSY, 10% in Norway (a single-country exposure), and the remaining portion in select Dow 30 stocks. Holding nearly 70% in money-market equivalents provides the portfolio with a deep safety buffer against severe market downturns. At the same time, it maintains a disciplined, rules-based toehold in the most resilient equity areas, allowing us to ride out turbulence without quitting the market entirely.
| Strategy | July | YTD |
|---|---|---|
| Top Performers | ||
| Universal Investment Strategy 3x Leverage | −5.9% | 3.3% |
| Maximum Yield Strategy | −3.8% | 5.5% |
| Gold-Currency Strategy II | +0.3% | 8.0% |
| Universal Investment Strategy 2x Leverage | −4.0% | 2.9% |
| Top 3 Strategies | −5.1% | 3.8% |
| Rotation & Risk-Managed | ||
| Dow 30 Strategy | −3.2% | 13.9% |
| Global Market Rotation Strategy | −3.8% | 6.2% |
| Global Sector Rotation Strategy | +0.3% | 7.3% |
| Leveraged Gold-Currency Strategy | −5.5% | −1.5% |
| World Top 4 Strategy | +1.1% | 7.3% |
| NASDAQ 100 Strategy | −12.6% | −4.5% |
| US Market Strategy | −2.4% | 7.2% |
| US Sector Rotation Strategy | −0.2% | 2.0% |
| Aggressive Risk Portfolio | −5.8% | 1.0% |
| Moderate Risk Portfolio | −1.0% | 5.5% |
| US Market Strategy 2x Leverage | −10.0% | −0.7% |
| Conservative, Hedge & Bond | ||
| Hedge Strategy | +0.3% | 4.3% |
| Enhanced Permanent Portfolio Strategy | −1.7% | 1.7% |
| Conservative Risk Portfolio | −1.9% | 6.1% |
| BUG Permanent Portfolio Strategy | −2.0% | 2.6% |
| Universal Investment Strategy | +0.1% | 5.3% |
| Bond ETF Rotation Strategy | −2.6% | 5.8% |
| Watch | ||
| Crypto & Leveraged Top 2 Strategy | −5.2% | −29.1% |
Performance based on signals issued by Logical Invest. Slippage and fees are not included.
Our aim heading towards September is to do so with peace of mind. By letting systematic rules carry the heavy lifting of risk management, you do not have to choose between extreme exposure and sitting completely on the sidelines. Instead, you can stay focused on your long-term financial goals, knowing that the models are continuously adapting to whatever the market presents next.