📘 Knowledge Base – Portfolio Operational Guide

Version: 2025.10 | Last Updated: October 2025

🧭 Table of Contents

Introduction
Portfolio Structure & Objectives
Economic Cycle & Sector Rotation
DCA (PAC) Operational Rules
Market Phases & Optimal Behavior
Indicators & Thresholds
P2P & HY Strategies
Bond Management & Duration
Behavioral Discipline
Actions During Market Crashes
Rotation Signals & Thresholds
Asset Class Switching Rules
Operational Examples
Technical Glossary

Introduction

This Knowledge Base provides a comprehensive operational guide for dynamic multi-asset portfolio management based on macroeconomic and market indicators automatically monitored by the Cloudflare Indicator Dashboard.

Objectives:

Manage monthly DCA (Dollar Cost Averaging / PAC) based on economic cycle
Anticipate rotation from growth to defensive sectors and vice versa
Optimize risk-adjusted returns
Decide when to shift capital between stocks, bonds, P2P, and cash

1️⃣ Portfolio Structure & Objectives

Allocation:

Stocks (70–85%): Growth/Tech/AI, Health Care, Consumer Staples, Utilities, Low Volatility/Industrials
Bonds (10–20%): Government and corporate HY
P2P/Crowdfunding (10–15%)
Crypto (5%)
Strategic cash & monthly DCA (€10k/month)

🎯 Main Goal: Reduce maximum drawdowns and optimize average annual returns based on economic phases, without panic selling.

2️⃣ Economic Cycle & Sector Rotation

Phase	Macro Characteristics	Preferred Sectors
Recovery	Low rates, moderate inflation, rising earnings	Growth, Tech, Industrials
Expansion	Strong growth, rising rates	Financials, Industrials
Late Cycle	Slowing growth, flat yield curve	Health Care, Staples, Utilities, Low Vol
Recession	Negative GDP, falling rates	Bonds, Defensives, Gold
Restart	Rate cuts, earnings rebound	Growth, Small Cap, Tech

🔄 Sector rotation is detected via combination of indicators (RS, Yield Curve, HY Spread, VIX).

3️⃣ DCA (PAC) Operational Rules

Monthly DCA is the primary reallocation tool
Don't sell assets based on single signals: adapt new contributions
If ≥3 signals converge on "defensive rotation":
- Reduce tech/AI DCA by 20–30%
- Proportionally increase staples, health, utilities, min-vol
During panic or drawdown >40%:
- Pause defensive DCA for 1–2 months
- Redirect flows to growth and AI gradually (2–3 tranches)

4️⃣ Market Phases & Optimal Behavior

Market Phase	DCA Action	Operational Notes
Strong Rally (Euphoria)	Maintain growth but start defensive accumulation	Don't anticipate the top, but reduce tech concentration
Late Cycle / Defensive Rotation	Increase staples, health, utilities, bonds	Yield curve < 0 and defensive RS in uptrend
Crisis / -40%	Hold position, increase tech gradually	Act with 3 tranches post-decline
Post-Recession Recovery	Reduce bonds, reintroduce growth and cyclicals	Watch timing of rate cuts

5️⃣ Indicators & Operational Thresholds

Indicator	Source	Frequency	Threshold	Action
RS_XLV_XLK (Health vs Tech)	Stooq	Daily	> SMA(63)	Defensive rotation active
RS_XLP_SPY (Staples vs SPY)	Stooq	Daily	> SMA(63)	Increase staples and utilities
SPLV_SPY (LowVol vs SPY)	Stooq	Daily	> SMA(63)	Increase min-vol and bonds
VIX	FRED	Daily	> 30	Reduce risk / pause growth
HY_OAS_US	FRED	Daily	> 8%	Credit stress → reduce P2P, increase IG bonds
YC_US_10Y_2Y	FRED	Daily	< 0	Late Cycle USA
YC_EU_10Y_2Y	Bundesbank	Daily	< 0	Late Cycle Eurozone

6️⃣ P2P & HY Strategies

Parameter	Threshold	Action
P2P–HY Spread < 2.5%	Little P2P advantage	Reduce P2P 30%, migrate to HY
P2P Default Rate > 2%	Rising risk	Close most exposed platforms
HY OAS > 8%	High tension	Shift 20–40% from P2P → Quality HY
HY OAS < 5%	Compressed spread	Return to selected P2P

7️⃣ Bond Management & Duration

Scenario	Bond Strategy
Real rates > +1%	Medium duration (3–5y)
Real rates < 0%	Short HY or floating
Bundesbank/FED cuts > 75 bps/year	Extend duration (6–7y)
Stable inflation & steady rates	Maintain 50% IG, 50% HY mix

8️⃣ Behavioral Discipline

Don't act on a single signal
Rotations require confirmation of at least 3 converging indicators
Use coupons, dividends, and P2P flows as rotation tools
Avoid averaging down without reversal signals
DCA is the main weapon against market timing
Decisions are based on indicators, not emotions

9️⃣ Actions During Market Crashes

Event	Recommended Action
-20% correction	Keep everything unchanged, continue DCA
-40% or more (Tech/Growth)	Increase tech with 2–3 tranches (10–15% from bonds/defensives)
-50% or generalized panic	Strongly rebalance toward growth and small cap
Recovery 10–15% from lows	Pause new defensive purchases

🔟 Rotation Signals & Thresholds

Condition	Action
Defensive RS > SMA(63) for ≥3 days	Start rotation toward defensives
VIX > 30	Cut risk by 20–30%
HY Spread > 8%	Exit P2P, increase IG bonds
USA + EU Yield Curve < 0	Late Cycle, overweight health/staples
Growth RS > SMA(63) + VIX < 20	Return to growth and tech gradually

📈 Asset Class Switching Rules

Use DCA flows and coupons as first rotation lever
Only in extreme cases (>3 signals and -40% drawdown) sell liquid defensive assets
Always verify risk premium:
- (Tech Earnings Yield – Bond Yield) > 5 pp → convenient to rotate to growth
Rebalance in 3 steps spaced apart (e.g., every 30 days) to mitigate timing errors

📊 Operational Examples

Scenario	Action
RS Health/Tech ↑ and VIX >25	Reduce tech 20%, increase staples
HY Spread >8% + Inverted YC	P2P → HY and Gov 3–7y
VIX <15 and YC >0	Accumulate tech and small cap
Confirmed FED/Bundesbank rate cuts	Extend bond duration

📚 Technical Glossary

RS (Relative Strength): Ratio between two sectors or assets
SMA (Simple Moving Average): Simple moving average
Yield Curve: 10Y–2Y yield difference
OAS (Option Adjusted Spread): Credit spread adjusted for optional risk
Duration: Bond price sensitivity to rate changes
PAC/DCA: Dollar Cost Averaging plan
HY (High Yield): High-yield but higher-risk bonds
IG (Investment Grade): High credit quality bonds
Drawdown: Maximum loss from peak to trough
Defensive Rotation: Shift from growth toward defensive sectors

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