Pento Portfolio Strategies
Separate Managed Accounts (SMA)
Inflation/Deflation and Economic Cycle ModelSM
PORTFOLIO AS OF September 30, 2018
Pento Portfolio Strategies - Inflation/Deflation Economic Cycle Portfolio
PPS offers an actively managed product that provides complete access to Michael Pento’s 27 years’ worth of industry experience, direct account supervision and proprietary investment model.
- Adaptive, dynamic management of Michael’s investment philosophy.
- Investment Model specifically designed to determine the Inflation/Deflation and Growth dynamics within markets. We locate where the economy sits along those five specific sectors and use the model’s 20 components to determine where to allocate funds across that spectrum.
- The goal is to maximize investor returns by shielding them from periods of deflationary recessions, as well as seeking to provide a real return during times of USD depreciation.
The Pento Portfolio Strategies’ Model SMA attempts to provide an improved hedging strategy against inflation, while also offering protection against cyclical periods of deflation. We utilize top-down proprietary-macro analysis to position the portfolio in broad asset classes, depending on our view of prevailing inflationary or deflationary forces, as well as the level of economic growth. We then use our technical database to select the best possible investments.
The Investment Policy Committee convenes weekly where investment themes and strategies are presented and approved by Michael Pento (Committee Chairman). Performance reviews are then conducted on each asset class and individual investment.
Sample Model Components
PPS’s proprietary investment model uses various metrics to determine the macroeconomic environment in relation to the inflation/deflation and growth dynamic
Inflation/Deflation Model Components:
- Major Central Bank Monetary Policies
- Real Interest Rates (EFFR - 10-year Breakevens) USD Value Against Major Trading Partners Inflation Breakeven Spreads
- ISM Prices Paid Components
- Industrial Commodity Prices
- Gold Prices
- Nominal Long-term Bond Yields
- M/M CPI
- WTI and Brent Crude Prices
Economic Cycle Model Components:
- Pub. Prv. Sector Debt to GDP Shape of Yield Curve
- High-yield & LIBOR Spreads Retail Sales
- Equity Valuations/ EPS Growth ISM Headlines
- Initial Unemployment Claims GDP Tracking Data
- Pending Home Sales
- Total Vehicle Sales
Pento Portfolio Strategies 20-point Model uses a diffusion index to pinpoint the appropriate investment allocation. Based on this result, we will assign weightings to inflation/deflation and economic cycle investments. The investable universe includes domestic stocks, foreign stocks, commodity proxies, domestic and foreign bonds, currency hedges and short-market strategies; including options and inverse ETFs. PPS does not utilize margin .
Portfolio Rebalancing And Turnover
Portfolio rebalancing occurs whenever the model dictates it is necessary to move along the inflation/deflation spectrum and/or when the weightings have moved more than 5% outside of the recommended allocation. PPS also focuses on technical price levels relative to trading ranges and utilizes an active risk management strategy that seeks to lock in gains and limit losses.
The Inflation/Deflation Dynamic Portfolio and Inflation/Deflation Model “SM”are the proprietary property of Pento Portfolio Strategies; all rights reserved.
Past investment performance is not indicative of future results. Advisory services offered through Pento Portfolio Strategies, LLC. a Registered Investment Adviser.
Holdings represent the largest holdings in the Pento Portfolio Strategies Model – SMA Managed Account as of 9/30/2018 These holdings are subject to change at any time without notice and individual account holdings may vary. The specific securities do not represent all the securities PPS Model - SMA has purchased, sold, or recommended for clients over the past year. The reader should not assume that investments in securities listed above were or will be profitable. Sector diversification represents sector allocations in PPS Model – SMA as of 9/30/2018. These sector allocations are subject to change at any time without notice and individual account sector allocations may vary. This document has been prepared for the intended recipient only as an example of a strategy consistent with our recommendations; it is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular investing strategy. All securities involve varying amounts of risk, and their values will fluctuate.
Use of Benchmarks: The Inflation-Deflation model is unique in the marketplace and is positioned to benefit from cyclical periods of inflation where gold and other commodities may outperform the overall market and/or periods of deflation where a short market strategy may outperform the major indexes. While the Inflation/Deflation Portfolio is not attempting to be a proxy for the S&P 500 investors, are encouraged to also compare performance to the S&P 500 over long durations.
Carefully consider the risks and special considerations associated with investing in the Model – SMA Managed Account. You may lose money by investing in the Model Portfolio.