There are no changes to the Model Portfolio this week.
Stock markets delivered another positive week as all the major indices reached new bull market highs. The technical trend still favours higher prices in the short term, though valuations are now stretched. The S&P 500 currently trades at 19.7 times 2013 real earnings.
Economic: It was a quiet week for economic news. Jobless claims continued to edge lower in the US and the unemployment rate has continued to decline from 8.1% in 2012 to an estimated 7.6% in 2013. The New York manufacturing survey weakened slightly.
Technical: From a technical standpoint, the technical trend still looks okay, though market breadth has started to diverge. The Advance/Decline Line has stalled at new highs, unable to keep pace with the recent stock market rally. There is still little urge to sell as momentum investors continue to chase performance through yearend.
Strategy: The stock market remains overvalued, overbought in the near-term and investor sentiment has reached an optimistic extreme. We therefore maintain our cautious stance for now with an allocation in the model portfolio of 20% stocks, 50% bonds, 20% gold and 10% cash.
Next update: Monday 22nd November 2013.