This is the first published FuseTrader portfolio, and the initial one for 2021. It is Jan. 4, 2021 and the markets are starting the year off with a bang, currently trading down 1.8% on the SPY. The image below is the FuseTrader Dashboard and displays the opportunity set for the current portfolio (click on image to enlarge):
Despite all of the information provided in the above Dashboard and our systems initiating some type of coverage on 94 different tickers - all of which I will explain in detail in a later post, the portfolio optimization process generated a surprisingly simple result.
- Long TIP at 90%
- Short SHOP at 3%
- Long COP at 2%
- Long SLV at 2%
- Long UVXY at 2%
- Long CVX at 1%
The systems are dictating that we play it safe with TIP as 90% of the portfolio. This is mainly due to the inflation expectations in our base case, at 2.5% annually, as well as the very low standard deviation of this instrument. This combination provides the portfolio with outstanding reward for the amount of risk we're taking.
In addition, the Volatility Model is generating our 'warning' status as well as a long position in UVXY. These positions are typically short-lived so be prepared to close it soon. The SHOP short was generated on a weekly reversion signal which tends to last for at least a month. The combination of long UVXY and short SHOP let's us sleep well at night knowing our portfolio is protected against significant downside risk.