- Yield Curve: The yield curve – the difference between short and long-term interest rates – has been identified through numerous research papers as the most accurate indicator of future economic growth.
- Credit Spreads: Credit spreads – the difference between junk bond and Treasury yields – are also predictive of future economic growth but must be used in conjunction with the yield curve to provide actionable information.
- Valuations: The most accurate predictor of future asset returns is current valuations. Valuations are also useful in quantifying asset risk.
- Momentum: Momentum is known to exist in market assets and plays a role in identifying assets that are likely to perform well in the future.
- US Dollar: The trend of the dollar provides insight into global capital movements. Countries that are performing well economically will generally have stronger currencies than those that are not.
- High-Frequency Economic Data: We analyze every economic report for trend purposes.
The Citadel Portfolio starts with the asset allocation of our original Fortress Portfolio. The portfolios are constructed using ETFs and/or mutual funds for each asset class in the Fortress allocation. The macroeconomic research above is used to adjust the allocation for current economic and market conditions. It is this combination of a diversified strategic plan – the Fortress Portfolio allocation – and intelligent tactics, that together produce a dynamic, tactically adjusted Citadel Portfolio.
Your Citadel portfolio starts with an allocation chosen based on your risk profile:
This strategic allocation has the same asset classes as the Fortress Portfolio: Large Company stocks, Small Company stocks, Real Estate, Commodities, and Bonds. Changes to this basic asset class allocation are driven primarily by our assessment of the yield curve and credit spreads. Changes to this “big picture” strategic allocation are infrequent.
Tactical changes within each asset class are primarily driven by the other factors listed above. These changes are more frequent but still generally long-term oriented.
The Citadel Portfolio, the end result of our extensive research on the global economy, is designed to grow wealth in a structure that prioritizes safety and security. The strategic framework of the Fortress Portfolio provides a more consistent result than the traditional stock and bond portfolio making it ideal for pre-retirees and retirees alike. The tactical changes seek to improve on the already impressive track record of the Fortress Portfolio.
The Citadel Portfolio – a fortress against the market storms.