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OUR APRIL 2019 TACTICAL STRATEGIES REPORT

| April 08, 2019
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MARKET RECAP

  • S. equity markets rose for the third consecutive month capping a remarkable quarter with the largest S&P 500 Index gain (13.7%) in 10 years. Investors showed optimism regarding the Fed’s pause in raising interest rates and progress in trade talks.  (Monthly Market Commentary, MassMutual Funds, April 1, 2019)
  • Globally, markets rose in tandem, but recession fears have led international returns to lag the US. The MSCI EAFE (Developed Markets) index rose 0.6% for the month, and the MSCI EM (Emerging Markets) index climbed 0.8%.  (MSCI Factsheets, MSCI, March 31, 2019)
  • Domestic interest rates reflect fear of the slowdown in the growth of corporate earnings and GDP. Short-term rates have risen above longer-term rates, leading to an “inverted” yield curve.  Historically, this invesion precedes recessions, though generally over a one to three-year time period.    (Market Perspective, SunAmerica Asset Management, April 1, 2019)

INVESTMENT STRATEGY REVIEW

  • Our All Weather strategy allocates investments into seventeen asset classes that together have produced consistent results in a variety of economic environments. We analyze the trend of each asset class and invest if and only if its asset class closes above its 200 day moving average at month end. Funds that are not invested are moved to cash. For April, our only change was international large cap equities crossing above its 200 day moving average.  As a result, we moved 10% of the total portfolio value out of cash and back into the above-referenced asset class.  The strategy now has 21.5% in cash.
  • Our Momentum strategy incorporates both absolute and relative momentum. It invests evenly in the three asset classes that are above their 200 day moving averages (“absolute momentum”) and exhibiting the most momentum at the end of each month (“relative momentum”). For this portfolio, we define momentum as the average of the index’s latest 1, 3, 6 and 12 months total return. For April, long term treasuries are now exhibiting strong relative momentum and as a result will replace gold as one of our three asset classes.  The strategy is now invested evenly in real estate, gold miners and long term treasuries.
  • Our Risk Managed Momentum strategy is a dual-momentum based investment strategy with vigorous “crash” protection and a fast momentum filter. Dual-momentum combines absolute (trend following) and relative (cross-sectional) momentum.   The strategy employs a set of “canary” assets whose momentum dictates whether the strategy is “offensive” or “defensive” in that month.  For March, each of the “canary” assets exhibited positive momentum, so the strategy is now invested evenly in the S&P 500 Index, high-yield fixed income, and real estate. 

 To see our full April Tactical Strategies Report:

April Tactical Strategies Report

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