Shielding Your Portfolio from the Market's Biggest Risk

The volatile year I expected is ramping up...

It's getting a little spooky out there.

And no, I don't mean the fires in Los Angeles that nearly burned my house down last week.

I mean how the markets have reacted to... good economic data.

Longtime members will know markets often enter a period where "good news" actually makes the stock market go down.

That's exactly what's happening now, and it means you need to make some key adjustments to your portfolio.

When Good News Means Bad News

You may have noticed US stocks sold off on Friday.

This came after multiple weeks of market weakness. Not only did the Santa Rally not materialize this year, but the S&P 500 actually fell in December and is now -4% in the last month:

First off, I am not overly concerned about this near-term weakness. Stocks had been on an incredible run leading into December. Even without the typical end-of-year Santa Rally, the index still finished the year up 22%. That's an exceptionally strong year by any measure, although not as exceptional as the TikStocks Portfolio 45% gain.

But the culprit for this most recent pullback was rather unusual: the economy is doing too well. US employers added 256,000 jobs in December, well above economists’ forecasts, while the unemployment rate dropped. Normally, you'd think that would be a good thing as a stronger economy means the country and its businesses are doing well.

But that's not always the case. See, the market really wants the Federal Reserve to keep cutting interest rates. And with the US economy doing well and inflation expectations rising (evidenced by rising US government bond yields), that means the Fed is less likely to cut interest rates.

This damages part of our investment thesis, which I have been calling the "global liquidity boom." And with corporate earnings starting this week, we need to make some changes to the portfolio.

Selling Fair Isaac Corp. for a +117% Gain, Plus Other Changes

First, I want to note that Fair Isaac Corp. (FICO) hit its protective stop loss yesterday and was sold for a +117% gain. This nearly quadrupled the S&P 500 gain of +31% over the same period.

That's a ton of alpha we squeezed out of this one. Incredible run, but with the technical uptrend breaking down it's not the worst time to take some profits. We can always re-enter this one later on.

Next, we need to make a handful of portfolio changes. That includes locking-in another triple digit gain and raising stop losses on multiple positions.