A PCA-Based Multi-Asset Class ETF Portfolio for these Uncertain Times
In this post we asked a Statistics-trained AI to construct a portfolio consisting of ETFS representing Asset Classes viz: DXY=Currency [USD]; DCB=Commodities; IEF=10-year Treasury; SPDR=Equities [SP500]; GLD=Gold. Data as of 4 June 2025 The initial PCA (Principal Components Analysis out is presented in the chart below: The Correlation matrix Heatmap is shown below: The Investor’s instructions to the AI was: “ The uploaded .xlsx contains the prices of the most common and most liquid ETFs representing the different asset classes viz: SPDR, DXY, IEF, GLD, DBC. Due to the unpredictability of the current situation in the financial markets caused by the US-China trade war and the unpredictable behavior of the current U.S. President, use the most recent PCA loadings. Assume I am a retiree with no regular income and live on the monthly payout from my Social Security and the interest rate payment from my bank savings account. The current bank savings account interest rate is 2.5 % ...