- The US economy is now in it’s longest expansion in history with data going back to 1854. It began it’s 11th year – or 121st month – on July 1, 2019 (Higley -By The Numbers 7/8/19).
- After a difficult May, markets advanced broadly. Large company stocks, as represented by the S&P were up 7.1%, small company stocks (Russell 2000 index) were up the same. International stocks rose by 5.9% and emerging market equities advanced 6.2%. All of the bond sectors we follow rose in June, as did gold and commodities (Morningstar Direct Database).
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 July, domestic large cap, small cap, international large cap, small cap and emerging market equities all moved above their 200 day moving average. As a result, we moved 42% of the total portfolio value out of cash and into said asset classes.
- 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 July, both domestic large cap equities and gold rallied, exhibiting very strong momentum scores and subsequently replacing the domestic aggregate bond index and long term treasuries. The strategy is now invested evenly in real estate, domestic large cap equities and gold.
- 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 July, all of the “canary” assets exhibited positive momentum, transitioning the strategy from our strongest defensive asset to our three offensive asset classes with the greatest momentum – gold, domestic large cap equities and domestic small cap equities.
To see our full July 2019 Tactical Strategies Report: