March Monthly Investment Update
ASSET ALLOCATION UPDATE
Source: Blueprint Investment Partners
Adjustments can vary across strategies depending on each strategy's objectives. What's illustrated above most closely reflects allocation adjustments for the Growth Strategy. Diversification does not guarantee investment returns and does not eliminate the risk of loss. Diversification among investment options and asset classes may help to reduce overall volatility.
U.S. Equities
Exposure will decrease but remain overweight as exposure is returned to strengthening international equities and real estate securities. Trends over all timeframes are positive.
International Equities
Exposure will increase but remain underweight. Trends are now positive across all timeframes for both foreign developed and emerging markets, however, international equities continue to be weaker than U.S.
Real Estate
Exposure will increase but remain underweight. Trends are now positive across all timeframes but it continues to be weaker than U.S. equities.
U.S. & International Treasuries
Exposure will increase slightly but remain underweight. The intermediate-term trend in 1- to 3-year U.S. Treasuries is now positive, but that is the only timeframe and segment in a rising-trend state.
Inflation-Protected Bonds
Exposure will remain at its minimum due to a combination of downtrends and relative weakness compared to other fixed income segments.
Alternatives
Exposure is expressed through a multi-asset alternative ETF. The largest net allocation remains long bonds followed by long stocks. Commodity exposure remains a meaningful net long allocation while currencies are now materially net short versus. the U.S. Dollar.
Short-Term Fixed Income
Exposure will decrease but remain overweight as it gives back a small portion to U.S. fixed income while continuing to retain the allocation vacated by weaker fixed-income instruments of higher duration.
MONTLHY NOTE
A Disciplined Strategy Helps Avoid Self-Inflicted Wounds
“The investor's chief problem — and even his worst enemy — is likely to be himself.” – Benjamin Graham
Great investors don’t just accumulate experience — they learn from it. The best share a common trait: they don’t chase what’s flashy or react impulsively. They rely on time-tested processes that remove emotion from decision-making.
After years of observing what works and what doesn’t, we have seen investors make the same mistakes over and over: chasing past winners, selling in fear, and letting short-term emotions derail long-term success.
Every year, the data confirms what professional advisors have long known: investor behavior is often the biggest drag on returns. An annual study by DALBAR quantifies this gap, showing just how much poor decision-making costs the average investor. The takeaway is clear — having a disciplined strategy isn’t just about maximizing returns, it’s about avoiding the self-inflicted wounds that erode them.
In this month’s Note, we explore why closing the behavior gap is one of the most valuable roles an advisor can play. We also highlight why systematic trend following isn’t just an investment strategy, it’s a behavioral advantage that helps investors stay the course through all market conditions.
But first, here's a summary of our take on what transpired in the markets in February.
Asset-Level Overview
Equities & Real Estate
After making new all-time highs on February 19, the S&P 500 Index has pulled back a bit as it struggles to finish with a positive monthly return. Dividend payers have led, putting them in a top spot year-to-date as well. Small caps are the worst performing U.S. segment in February and one of the poorer performers for the year so far, with growth stocks also performing near the bottom domestically. Despite the mixed performance, all segments are looking at uptrends across all timeframes, except for small caps, which are flirting with an intermediate-term downtrend.
Just when investors had begun to give up on international equities, they began the year by leading over their U.S. counterparts. Both foreign developed and emerging markets are on track for solid returns in February, extending their lead for the year. While still trailing the U.S. in our measures of relative strength, they are now experiencing uptrends across all timeframes.
Real estate securities have quietly regained their footing after a poor close to 2024, managing to regain uptrends across all timeframes but continuing weakness relative to other equity or equity-like segments. The result is that our allocations will increase slightly but remain underweight.
Fixed Income & Alternatives
While the odds of rate cuts continue to dwindle, fixed income prices have stabilized and even made some progress toward regaining uptrends. In fact, 1- to 3-year Treasuries have generated an intermediate-term uptrend and will receive an allocation accordingly, but that is the only timeframe and segment in a rising-trend state.
In the alternatives allocation of our portfolios, the largest exposure remains tilted toward the fixed income sector. Like the non-alternative fixed income allocation, the portfolio favors long positions in short-duration government bonds. The equity sector is predominantly hedged but retains a net long position, with most of its long exposure focused in the U.S. Additionally, commodities exposure continues to hold a net long position. Currencies, particularly those pegged against the U.S. Dollar, are now a meaningful short position in the portfolio.
Sourcing for this section: Reuters, “S&P 500 edges to record closing high as Fed minutes parsed,” 2/19/2025
3 Potential Catalysts for Trend Changes
Consumer Spending Driven by Top 10% of Earners: The top 10% of earners, which are households making around $250,000 a year or more, are spending: vacations, handbags, and other luxury items. The spending is supported by big gains in stocks, real estate, and other assets. Those households now account for 49.7% of all spending, a record in data going back to 1989; 30 years ago, they accounted for about 36%. Mark Zandi, Chief Economist at Moody’s Analytics, has estimated that spending by the top 10% accounts for almost one-third of gross domestic product.
Housing Woes: Sales of new homes dropped in January. Elevated prices and persistently high mortgage rates continued to weigh on potential buyers. Sales of new single-family homes declined to 657,000, which is down 10.5% versus the prior month; compared with January 2024, sales were down 1.1%. As for existing home sales, they fell 4.9% in January.
Hiring Pessimism: Optimism about the U.S. economy and job market has not translated into tangible increases in hiring activity. Executives at Randstad, the largest employment agency by revenue, say they see a disconnect between sentiment and reality in the U.S., as businesses profess a strong job market but recruiters wait for a hiring surge. “Our clients have been dealing with inflation, high interest rates… so hiring activity has been very low; however, we see early cyclical sectors starting to improve,” Randstad CFO Jorge Vazquez said.
Sourcing for this section: The Wall Street Journal, “The U.S. Economy Depends More Than Ever on Rich People,” 2/23/2025; The Wall Street Journal, “U.S. New-Home Sales Slump at Start of 2025,” 2/26/2025; and The Wall Street Journal, “U.S. Economic Optimism Isn’t Converting Into Hiring Yet, Randstad CEO Says,” 2/12/2025
A Refresher on DALBAR’s Research
“You can observe a lot by just watching.” – Yogi Berra
We were recently discussing a timeless gem: the renowned annual DALBAR Quantitative Analysis of Investor Behavior (QAIB) report. Over the years we have repeatedly referred to this important research as a justification for the benefits of having a professional financial advisor paired with systematic trend following.
As a refresher, DALBAR’s study assigns a numeric value to the shortfall between typical investor returns and the relevant indexes. It then explains why this shortfall is largely attributable to poor investor decision making. The general idea is if you did nothing and invested in the index, you would get the index return less fees. Thus, and all else equal, any return above or below the index is explained by actions taken by the investor.
A summary of the most recent analysis can be found here. For ease, we’ve excerpted key findings below:
· The Average Equity Fund Investor Underperformed the Market: The Average Equity Investor earned 5.5% less than the S&P 500 in 2023, the 3rd largest investor gap in the last 10 years.
· The Average Fixed Income Investor Underperformed to a Lesser Degree: The Average Fixed Income Investor earned 2.63% less than the Bloomberg Barclays Aggregate Bond Index gain.
· Emotional Decisions Hurt Returns: Investors tend to sell out of investments during downturns and miss out on rebounds. The report illustrates the importance of a long-term investment strategy.
· Retention Rates Increased: The Average Equity Fund Investor held onto equity funds for a longer period in 2023 compared to 2022.
We believe these findings are important for our clients to understand. They demonstrate that the goal should not necessarily be to beat the market and that financial advisors can help investors close the gap on the market, since studies show they would woefully underperform if left to their own devices. Obviously, beating a reasonable benchmark is fantastic, but that is probably unrealistic for most clients without the aid of an advisor. This knowledge should help change the framework and level set expectations.
Another big takeaway from the DALBAR study is that using strategies that can improve investor behavior are arguably the easiest way for clients to benefit from an investment management perspective. In our opinion, nothing holds a candle to systematic trend following when it comes to improving behavior and helping clients stay on track.
Sometimes in the push for more and more returns it is easy to slightly lose sight of the gap we are trying to close between the goal and reality.
Important Information:
Blueprint Financial Advisors (“Blueprint”) d/b/a Miller Wealth Partners is an investment adviser registered under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply any level of skill or training. For more information, please visit adviserinfo.sec.gov and search for our firm name. All content available on this website is general in nature, not directed or tailored to any particular person, and is for informational purposes only. Neither the website nor any of its content is offered as investment advice and should not be deemed as investment advice or a recommendation to purchase or sell any specific security. Blueprint does not represent that any opinion or projection will be realized. Neither Blueprint nor any of its advisers, officers, directors, or affiliates represents that the information presented on this website is accurate, current or complete, and such information is subject to change without notice. Past performance is not a guarantee of future results. Neither this website nor its contents should be construed as legal, tax, or other advice. Individuals are urged to consult with their own tax or legal advisers before entering into any advisory contract.
Past performance is not indicative of future results. The material above has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation.
Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed.
Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of writing and are subject to change without notice. The above commentary is for informational purposes only. Not intended as legal or investment advice or a recommendation of any particular security or strategy.
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An index is an unmanaged portfolio of specific securities, the performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Investors cannot invest directly in an index. An index does not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown.
S&P 500 Index: A widely used U.S. equity benchmark. It contains 500 U.S. stocks chosen for market size, liquidity, and industry group representation.