Many investors suffered significant, if not devastating, losses during the 2000-2002 bear market. At the same time, with the Federal Reserve lowering interest rates to stimulate the economy, other (more savvy) investors were reaping attractive returns in long-term bonds.

Moreover, many investors, still on the sidelines fearing further market declines, did not move back into stocks in time to benefit from the 28% rebound in the S&P 500 in 2003. So, how can investors make better decisions?

We believe that economic cycles are the fundamental driving force behind the financial markets for both stocks and bonds. In many cases, the economic circumstances that are most favorable for stocks are unfavorable for bonds, and vice versa. By concentrating your investments in the most favored asset class during each phase of the cycle, you take advantage of high opportunity periods, while avoiding periods with low returns and high exposure to losses.

This is not a market timing strategy. “Market timers” generally try to determine peaks and troughs in the market; and then make major shifts in the portfolio at perceived turning points. This can lead to gut-wrenching decisions and whip-sawing of the portfolio as economic circumstance fluctuate.

Rather, this is a value timing strategy. We strive to “tilt” the portfolio to favor the asset class with highest expected return and the lowest probability of losses in the current economic climate. Our implementation involves measured, systematic adjustments impacting less than 10% of a portfolio’s value in any given month.

To accomplish this, we have developed statistically validated decision rules for gauging the prospects for stocks versus bonds for in use overweighting our Model Portfolio toward the most favored asset class. The result, the Barometer Investment Strategy, is a dynamic portfolio management process that systematically adjusts your portfolio to changing economic conditions. This provides for superior returns at a comfortable level of risk.