The Logical-Invest monthly newsletter for April 2016

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Logical Invest
Investment Outlook
April 2016

Market comment:

March has been a very busy month for central bankers. Nine of them moved to further cut interest rates. Negative interest rate policy (NIRP) is now a reality in Japan, the E.U., Switzerland, Denmark and Sweden. This month the ECB expanded its asset purchase program to include non-financial corporate bonds. In the U.S, NIPR is becoming a very likely policy choice. Whether it will be implemented and whether it will be a positive for the real economy needs to be seen. What is more certain is that central banks have yet again showed commitment to a low rate environment and their full support to asset price growth. This is positive for our strategies that can select from a varied universe of asset classes, including gold, domestic and foreign bonds.

Almost all our strategies are outperforming the S&P 500, for the year. Best performers have been the Maximum Yield strategy with +17%, the leveraged Universal strategy with +14% and our new Gold-USD strategy with a +6.7% return. Our more conservative and stable UIS strategy returned 5.6%.

SPY, the S&P500 ETF, has returned 0.81%, year-to-date.

Looking at the markets, it seems that a shift has occurred from 2015. As we mentioned in the March investment outlook, cross-asset correlations have returned to normal levels. In other words, Treasuries and Gold are working again as both portfolio diversifiers and as hedges to protect from pure equity risk. On top of that these assets performed well. Gold in particular returned +15% year-to-date. Other assets classes are also showing strength. Our countries selection algorithm (World-Top-4 strategy) returned 8% just for March.

Our All-Strategies subscribers will notice that the shift in the markets is reflected in our algos. Our bond strategy (+5.95% YTD) has shifted to include non-U.S. based bonds (PCY) for a few months now. The bug strategies are suddenly picking up pace, allocating to GLD as well as TIPs. The leveraged version of the strategy is moving from below 40% invested in January to 160% invested for this April. Our World-Top-4 strategy is starting to allocate to previous under-performers like the Peruvian ETF (EPU).

The question is when does participate and how does one select undervalued assets classes or stock in their portfolio. Many asset classes such as Gold and Emerging Markets have been in such a prolonged correction that one is hard pressed to pick them for inclusion in a portfolio. Even if gold or countries like Canada may seem like bargains, one cannot easily pick a time to buy. If left unassisted an investor may opt out for a prolonged period and only enter the trade when it is too crowded and too late. So following some kind of rules based investment plan (not just ours) is a must.

Logical Invest, March 31 2016

Strategy performance overview:

symbol close year to date % ▴ 3 month % 1 month % 1 day % 60 day volatility 60 day correlation 3 month Sharpe 12 month Sharpe 36 month Sharpe LastModified: 3/31/2016
MYRS 660.20 17.36 15.57 5.95 0.65 20.14 -0.04 6.37 0.53 1.40
UIS-SPXL-TMF 5761.62 14.35 12.14 8.15 0.67 20.28 0.42 4.50 -0.36 1.99
TLT 130.61 8.73 9.11 -0.09 0.71 12.89 -0.58 5.14 0.25 0.68
GOLD-USD 285.01 7.01 6.70 -3.19 0.12 11.70 -0.22 3.74 1.51 1.65
WORLD-TOP4 282.15 6.36 4.56 7.91 0.24 11.51 0.55 2.49 -0.17 2.40
BRS 261.47 5.95 5.83 1.09 0.55 6.16 -0.36 6.20 0.63 1.89
GSRLV 496.57 4.61 3.80 1.55 0.41 8.07 0.38 2.90 -0.29 1.33
UIS 482.99 4.59 4.09 2.46 0.31 7.11 0.49 3.56 0.14 2.03
AGG 110.83 3.03 3.29 0.87 0.31 2.73 -0.29 7.48 0.83 1.02
NASDAQ 100 1021.11 2.58 0.59 5.86 0.45 20.12 0.65 0.16 1.09 2.71
BUGLEV 273.69 2.12 1.67 1.26 0.43 4.88 -0.22 2.07 -0.90 1.08
SPY 205.52 0.81 -0.91 6.29 -0.24 18.31 1.00 -0.28 0.10 1.29
GMRS 3809.10 0.81 -0.89 1.95 -0.57 15.92 0.68 -0.31 -1.32 0.32
BUGST 208.52 0.25 -0.17 0.87 0.35 5.39 0.30 -0.18 -1.50 1.16

 

Symbols:

BRS – Bond Rotation Strategy
BUGST – A conservative Permanent Portfolio Strategy
BUGLEV – A leveraged Permanent Portfolio Strategy
GMRS – Global Market Rotation Strategy
GMRSE – Global Market Rotation Strategy Enhanced
GSRLV – Global Sector Rotation low volatility
NASDAQ100 – Nasdaq 100 strategy
WORLD-TOP4 – The Top 4 World Country Strategy
UIS – Universal Investment Strategy
UIS-SPXL-TMF – 3x leveraged Universal Investment Strategy
AGG – iShares Core Total US Bond (4-5yr)
SPY – SPDR S&P 500 Index
TLT – iShares Barclays Long-Term Trsry (15-18yr)

 

 

 

2017-10-02T20:00:00+00:00By |2 Comments

About the Author:

Vangelis has been involved in quantitative research and development since 2007. He blogs under the 'Sanz Prophet' alias. He has built, run and tested literally thousands of trading systems using Matlab, Python, C#, QuantShare and Amibroker and has contributed as a researcher/programmer in academic papers. His quantitative blog has been part of the “Whole Street” quant blog aggregator since inception. He holds a B.A. in Economics & Theater Arts from Cornell University and an M.F.A. in Motion Picture Producing from the Peter Stark Program at the University of Southern California. Before entering the financial world Vangelis worked as a film and commercial director and collaborated with agencies such as Bold Oglivy, Adel Saatchi and Saatchi and clients including Pepsico, P. & G., Hyundai and others.

2 Comments

  1. David 04/02/2016 at 1:39 pm

    This Apr 2016 newsletter & its Strategy Performance Overview came in late. As such we were not able to review & make our own decision for allocation of individual strategies. Pls can u ensure future newsletters & Startegy performance overview are sent same time as the other Strategy emails? TQ

    • Vangelis 04/03/2016 at 3:47 am

      Hello David,
      Thank you for the feedback. Will do.

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