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Noise and an overwhelming amount of data is the biggest challenge in managing money in 2019 (or anytime in the past decade). In the 1960s, 1970s, and even the 1980s, delivering alpha came down to having access to information others didn’t have – the process of obtaining data was a value-add. Today, we have the complete opposite problem. In 2019 we have too much information, and delivering alpha comes down to paring things back to their essence, stripping away unnecessary garbage.
In the business of managing money, there is a key word that often comes up but is easily misunderstood: robustness. What does it mean for an investment strategy to be “robust”? What does a robust strategy look like? Is it something that most investors find palatable? Look at the following returns for two different managers, Mr. low vol and Miss robust.
The CTA space has struggled mightily over the past 10 years. We believe a CTA manager with a proprietary trading skill set, proven over time throughout various market regimes, is the necessary future of the industry. Trading proprietary firm capital under an SMA structure can have multiple benefits. This way, firms do not have the overhead and headache of bringing on a new trading team. Both parties are free to focus on what they do best; trading and managing risk.
Our tracking models for the end of July show that there have been changes in direction for all major sectors. This would usually suggest significant loses for trend managers but the relatively mild volatility and the slow reversals allowed for adjustment of signals to mitigate loses.
First look at the data to see what weighted market opinion is telling us. July marks a reversal to more risk-on behavior with strong gains in large cap US stocks as well as international and emerging market equities. While small cap, growth, and value indices all did well, the broader international concerns affecting risk behavior have abated. This positive global view was also seen in the international bond markets. The dollar rise from a desire for safety was contained and more range bound. Along with international bonds, credit markets improved with tightening spreads. The only losers for the bond sector were long-duration Treasuries and commodities.
Markets have seen a significant change in economic sentiment over the first quarter of 2018. Market views have moved from euphoria concerning tax cuts and global growth, to the fear of a volatility shock, to a revised view of growth, and finally to growth fears under the concern that a trade war is around the corner. Overall, major assets, both equities and fixed income were negative for the quarter. Large cap firms that engage in global trade were hurt in March while bonds rallied as the safe asset. US small cap equities did better given their focus on domestic growth. Emerging markets gained on the dollar decline and the continued belief that EM markets have room for independent growth.
2017 will go down as one of the most remarkable years for the US Stock market on record. The Dow Jones closed with 71 record highs which is a record in itself. The Dow posted a record high almost every three days. The S&P 500 posted gains of 19.4% with near-record low volatility while enduring geopolitical tensions, massive natural disasters, political turmoil in Washington and a tightening of monetary policy. In fact, the market currently has the calmest price fluctuation in 50 years, with the S&P 500’s average (daily up-or-down moves) a mere 0.30%. As a comparison, this is over half the move last year and almost a sixth (1/6) of the average daily move in 2008. It’s the smallest absolute daily move average since 1965; we had to trace back to 1964 when S&P 500 average daily move went below 0.3%. (Figure 1).
Historically the summer markets coincide with tight ranges and low volume. Trends seem to dry up, markets trade in tight ranges, and short-term opportunities can be rare. For instance, the past 30-day range in the SP 500 has been the tightest range since 1995. That particular market led to a 180% rally in the stock market over the […]
By Bryen Deutsch, Portfolio Manager, IASGPosted January 16th, 2013 One of the adages in the grain pits at the Chicago Board of Trade states “the best cure for high prices is high prices; the best cure for low prices is low prices.” Simple economic theory makes this saying understandable. When grain prices run to extreme […]
by Tyler Resch, Portfolio Manager, IASGPosted December 18th, 2012 As the temperature outside rapidly drops along with the volume in the market it is starting to dawn that 2012 truly is drawing to a close. We entered the year on the heels of record volatility, the largest bankruptcy the futures industry had ever seen, and […]
With summer winding down many investors are wondering what Q3 has in store for its final month. August was a relatively quiet month especially when we compare to August 2011 when the market had 3% swings numerous times a week. In contrast this summer in general has been a return to the summer slump we […]