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Tuesday, August 23, 2016

Portfolio Performance - August 23, 2016

Last few weeks have been extremely slow for the market, and also for our proprietary portfolio. Following chart shows the performance of SP500 in relationship with our portfolio.



Some of the key observations are:
  1. SP500 (total return) is up +0.62% MTD, while portfolio is down -0.5% for the same period
  2. Model has been consolidating in a very tight range, which means a break is coming
  3. SP500 is also stuck in a very tight range with a slight upwards tilt
  4. Historically, model's performance has been uncorrelated to the market with upwards bias. If this continues, we should expect a break-out in the near future

Portfolio Overview
At a time when stock market has not performed well, and has caused a lot of anxiety among investors, our prop investing strategy has out performed the market in all aspects:
  • Volatility - Historical testing shows that model has 8% standard deviation vs 16% for SP500
  • Sharpe Ratio - Historically, model has a sharp ratio 2.5+
  • Beta - Current weighted average Beta based on portfolio components is 0.32
And above all, model is positioned to take advantage of the next market move. Therefore, it enables one to relax and invest with confidence. 


Market Action and upcoming events
There are genuine reasons for current market calm e.g. August is a slow month and also people are awaiting Fed action. By some measures optimism among investors has reached levels where it has resulted in market declines. We think that market structure, IPM turn window and extreme in sentiments will give way to a sharper decline in the stock market after Labor day, once people return from vacation.

However, it won't be a reason to sell the market. The time to sell is now, if you want to. That will be time to buy because the trend remains up. Following the bull market is one of the most critical things an investor must do. Staying long in a bull market pays dividends in the long-term. At UST, we stay aligned with the trend by following our proprietary Market Classification Model

A proprietary algorithm that classifies market conditions i.e. Bull market or Bear market. Currently, this model is suggesting a longer-term up-trend for the US Stock Market. For Subscription click below:

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