March 2025: Risk+Defensives+Cash. And Chill.
· There’s real pain happening in the US equity market on an individual stock basis.
· MAG7 is no longer behaving like a safe haven (finally).
· S&P 500 Equal Weight and Large Cap Value have been a smoother ride.
· Utilities and MLPs have been important defensive exposures.
· High Cash Balances. 4% yield risk free is a gift.
Large Cap Tech is getting smoked in recent months - it has been the strongest performing and most overvalued portion of the US Equity market for a very long time. The S&P 500 has been vulnerable to this type of reversal with max concentration risk as I highlighted December 27th, 2024 here: https://westernlevel.com/commentary/buckle-up. The top 10 names in the S&P 500 (which are all Large Cap Tech) recently peaked at around a 30% weight of the index.
I’ve been minimizing Large Cap Tech exposure in recent months, choosing to focus on the Equal Weight S&P 500, Equal Weight S&P 100 and US Large Cap Value. These exposures have performed “just fine” in the current sell off compared to the Large Cap Growth centric areas of the market. For clients that own long-term positions the S&P 500 and US Large Cap Growth I’ve used equal weight and / or value exposure to gain important diversification for the Core Portfolio.
In the Satellite Portfolio, Utilities and MLPs have been excellent defensives amidst the sell off. The uranium exposure is biggest drag on the portfolio and is not a current concern. Some clients also have exposure to Metal and Mining, this has also seen a little weakness (tariff volatility) in 2025. I exited Energy in December 2024, which was a good decision…I would like to return to Energy on a deeper sell off.
High cash balances - with money market funds and short-term Treasury Bills offering over 4% yield in recent months it’s pays to be patient. Clients that joined WLA in the last several months have substantial cash balances as I patiently allocate capital.
I’m still monitoring Non-US Equity and will likely begin adding in the short-term. I am also considering longer dated fixed income exposure. If rates decline, long dated bonds will do very well…however, it is not a slam dunk that rates will decline.
In closing, global markets are resetting to a new economic policy per the administration in the Oval Office. I am eager to take advantage of the volatility and client portfolios are well positioned to do so.
US Equity draw downs as of March 13, 2025:
· S&P 500, SPY, -10%
· Magnificent Seven, MAGS, -20%
· Nasdaq 100, QQQ, -13%
· Russell 2000 (small caps) IWM, -17%
· S&P 500 Equal Weight, RSP, -10%
· Russell Large Cap Value, IWX, -6%
(Above draw downs measured from the peak share price achieved between November 2024 and February 2025 through March 13, 2025 for each ticker listed. Approximate calculations, price only, excludes income or dividends, not investment advice, past performance not indicative of future results, see full disclosure at below and at www.westernlevel.com.)
Here are some good charts about the current draw downs from Bianco Research LLC: https://x.com/biancoresearch/status/1900404355460915210
(link includes additional charts)
Best,
Jon Fritzinger
Founder / CEO
Western Level Advisors LLC
Hello@westernlevel.com
About Western Level:
Western Level Advisors LLC is an independent Registered Investment Advisor. The firm provides investment management and long-term financial planning services for individuals. All services are provided on a fiduciary and fee-only basis. Western Level’s only purpose is to establish a clear pathway for each client to help them manage and compound their wealth.
Western Level Advisors LLC ("WLA") is a registered investment advisor. The information provided in this commentary is intended to be informative and not intended to be advice relative to any investment or portfolio offered through WLA. The views expressed in this commentary reflect the opinion of the author based on data available as of the date this commentary was written and is subject to change without notice. This commentary is not a complete analysis of any sector, industry or security. This commentary is not intended to be a recommendation to buy or sell any investment. Please contact WLA with any questions regarding your accounts. The information provided in this commentary is not a solicitation for the investment management or other services offered by WLA. References incorporated into the commentary from third party sources are as of the date specified and are believed to be reliable. WLA is not responsible for errors in the third party data. Source information is provided under each chart. Additional disclosures are available at www.westernlevel.com.