Statement from Jason T. Lambert, Portfolio Manager / Senior Vice President

As many of you may have seen, we have experienced an increase in trading as of last week. In response to technical signals received from W.E. Donoghue, a tactical asset management indicator that we follow and trust, we have moved to a more defensive position in our growth model. What this means is that we are reducing our clients’ exposure to stocks and moving into short term treasury bonds and cash.

Our philosophy has always been to take a more defensive approach when Donoghue’s signals have triggered. For many of you, Donoghue makes up one of the largest holdings in our growth portfolio. The signal that caused the move to a more defensive position is based entirely on a rules-based model, using a long and short exponential moving average crossover. When the signals cross it is time to reduce our exposure to equity positions. There is no fundamental evaluation of market conditions, only the rules-based approach on the technical indicators.

This indicator is based only on the 50 stocks in their basket. Those stocks take an equal weight across all ten sectors of the S & P 500 and pick the top dividend payers in each sector. Dividend stocks have been out of favor for over a year, as has their stock basket, which has lagged the overall market over that period of time.

We recognize that the signal that triggered the recent pullback may not have triggered if Donoghue was using the S&P 500 index. Because of that, we remain invested in equities with a large portion of our portfolio. This tactical model is a component of our overall strategy, and is employed to hedge our market exposure in volatile times.

While we have seen some uptick in volatility, the duration of this holding pattern is unknown. It could be as short as a few days, or longer if the indicator proves to be a harbinger of things to come. We are aware there are many risks to consider, such as geopolitical risk, inflation, and interest rate risk.

We at Northwest Financial and Tax Solutions believe in reducing risk when necessary, so we are taking a proactive approach to help protect your portfolio by taking a more defensive position. We will continue to monitor the markets and provide updates when conditions warrant a move back into the market. Thank you for your continued faith and confidence in our firm.




Jason T. Lambert

Portfolio Manager/Senior Vice President
Northwest Financial & Tax Solutions