Ending March 20, 2026
The Members Message
Let's Get Technical
We have mentioned previously that we introduced some simple techncial analysis (TA) into our systematic approach given current circumstances with the US CAPE around 40.
There are many TA signals and tools an investor can use, but as with most things we prefer a simple approach. Fewer tools leads to what Einstein said "Make everything as simple as possible, but not simpler".
We also favour research and market history to help place current circumstances into a historical context. Jeremy Siegel in his book, Stocks For The Long Run, tested the 200 Simple Moving Average to determine if it helped investors secure higher returns over the long term.
When the CAPE is extremely high, history demonstrates that we can expect lower than average returns over the next decade. Therefore, we need to adapt our approach in order to capture higher returns than a buy and hold portfolio spread across the usual asset classes. We believe the benefit of using the 200 SMA is centered on avoiding the major portion of periodic large drawdowns when the CAPE is very high (like now) which emphasises our focus on not losing money. Hence the reason why we see some value in incoporating it into our approach.
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