Charles Sizemore explains his thought process surrounding the risk on, risk off decision:
So long as we remain in this high-correlation, risk on/risk off market, our investment performance will be closely tied to shifting political winds in Europe.
If Europe’s leaders manage to reestablish confidence in their respective sovereign bond markets, then it’s “risk on” and commodities and lower quality, more speculative stocks should do phenomenally well. But if we have another setback — say, if a major piece of reform legislation gets torpedoed by squabbling among Euro nations, or a botched referendum — then it’s “risk off” and you’d better be in cash.
In honor of the movie release of Michael Lewis’s Moneyball , I’ll use a baseball analogy. You run the risk of swinging big and missing if you bet on “risk on” and we end up with “risk off.” But, if you bet on “risk off” and we end up with “risk on” you run the risk of getting a called strike as a potential home run pitch whizzes right by you.
Having a mix of both “risk on” and “risk off” assets seems like a pretty good place to be given the current state of affairs. Current allocations for The Arrow DWA Balanced Fund (DWAFX) and The Arrow DWA Tactical Fund (DWTFX) are shown below:
In times when the “risk on” or “risk off” trade is in a more sustainable trend both of these strategies will tend to take greater overweights and underweights to different asset classes, but for now relative strength dictates a pretty even mix.
See www.arrowfunds.com for more information about DWAFX and DWTFX.
Posted by Andy Hyer 
