Well, almost entirely. I left a tiny bit in consumer staples ETFs and not my retirement accounts.
I just don’t see much upside over the summer months and I am able to get a gauranteed 4.5% on cash. Some rationale:
- We are not going to get a bump from lower interest rates anytime soon. Inflation is still present and a mix of boomers exiting the work force, tightening immigration and many geographies experiencing population decline will keep unemployment low.
- Its a good time to take profits and spend some time on the sidelines. We just had a hot streak the past couple years and Q1 retirement inflows to the indexes have bouyed the markets amid mixed news. Those inflows will be done when tax season wraps.
- Retail investors are definitely contributing to higher PE’s but that will run out eventually unless we experience a surge in GDP. Consumer debt is at an all time high and I think the risk of a sharp retail selloff is high if there were sudden mass layoffs, which actually, Trump is making happen right now.
- If the real estate market turns soft amid weak markets, I’d like to have cash ready to pull the trigger on real estate. I think this one is unlikely given housing shortages in many demographics, but we definitely already hit peak airbnb and construction has been busy, it will eventually catch up to demand. I could see a selloff of second homes as prices in working locations remain stable/high, especially if consumer staples inflationary pressure continues.
I will buy back in when things are more certain but I totally ok missing some upside to mitigate the risk of a few realistic bearish market scenarios.
I view this less as trying to time the markets and more as being realistic about my appetite for downside at the moment. I don’t expect to make more money by doing this but I do expect to hold onto more if things turn south. Any missed upside is just the cost of that assurance.