Rotation

Logical Invest Investment Outlook June 2018 Our top 2018 investment strategies, year-to-date : The NASDAQ 100  strategy with +9.81% return.   The Universal Investment strategy with +3.15% return.  The Global Sector Rotation strategy with +2.73% return SPY, the S&P500 ETF, returned +1.93%. Market comment: In May we saw both U.S. equities and U.S. Treasuries rise,  returning +2.43% (SPY)  and +2.01% (TLT) respectively. This was partly due to investors running away from Europe and into the safety of Treasuries, as Italy is once again in a political crisis. The dollar index (ETF:UUP) rose +2.6%, which partly explains why Gold, even though a safe heaven, lost 1.2% for the month. Same for emerging markets: Strong dollar causes weak foreign equity and the Emerging market ETF (EEM) lost 2.6%. Those affected the most were the southern Europeans: Spain -8.2%, Greece -14.1%. Some Latin American countries also went into crisis mode:  Mexico -13.4% on fear of tariffs and Brazil -15.7% on a continued union strike. Volatility on the other hand behaved as expected and ZIV gained +6.74% for the month. The Euro, lost another -3.2%. Most notable for this month is the continued flattening of the Treasury Yield.  In other words interest rates on short term Treasuries are rising faster than longer dated ones. This does not mean a recession is imminent. Historically an inverted curve (ie, a shorter term treasury bill/note  yielding more than longer dated one) may signal a recession, but when it has, it has taken an average of 12 months* for it to materialize. Date 1 Mo 3 Mo 6 Mo 1 Yr 2 Yr 3 Yr 5 Yr 7 Yr 10 Yr 20 Yr 30 Yr 05/01/18 1.68 1.85 2.05 2.26 2.50 2.66 2.82 2.93 2.97 3.03 3.13 The SP500 (blue line)  vs the 10 Year - 2 Year Treasury yield  spread (red line). Shaded areas [...]

Logical Invest Investment Outlook May 2018 Our top 2018 investment strategies, year-to-date : The NASDAQ 100  strategy with +6.49% return.   The Global Sector Rotation strategy with +1.28% return  The Universal Investment strategy with +1.04% return. SPY, the S&P500 ETF, returned -0.48%. Market comment: Spring is coming and so is the beginning of the challenging part of the investing year. There is a reason people say "Sell in May and go away". Historically, on average,  it has been easier to make money investing from November to April than from May to October. Seasonality does not predict price action but it does reveal a historical tendency of the market to underperform during the spring and summer months. Of course this applies to U.S. equities while the opposite holds for treasury returns. A revival of volatility is also pointing to a choppy market. After the unprecedented February spike in VIX, volatility has bounced back and forth a few times. It seems to want to settle in the 14-20 mid-range range rather than the 9-14 extreme low-levels of 2017. There is a wide-spread expectation that this levels will be the new norm going forward. Yields are up. Expectations are that the Fed will hike interest rates 3 more times this year. Unemployment is down at the 4.1% level for the 6th consecutive month. Wages are rising but at a slower pace than expected, meaning there is room to grow. Official (i.e., underestimated) inflation is at 2.4%. The 10-year Treasury touched the 2.96% mark, while the curve has flatten considerably. A 2-year note will give you a worry-free 2.49% yield while a 30-year 3.13%. Interestingly, just next door in Europe, the 2-Y German Government Bond will yield 0.58%, while investing in Bulgarian Gov. bonds will pay you less (1.25%) than the U.S. full-faith-and-credit backed 2Y Note. Surprisingly the EUR/USD rate has not [...]

Logical Invest Investment Outlook April 2018 Our top 2018 investment strategies, year-to-date : The NASDAQ 100  strategy with +8.02% return.   The Universal Investment strategy with +2.64% return.  The Global Sector Rotation strategy with +2.01% return. SPY, the S&P500 ETF, returned -1.00%. Market comment: In the beginning of March, most of our strategies allocated large amounts to TLT,  the Treasury ETF. Subscribers using multiple combined strategies ended up with Treasury exposure north of 70%. This was quite difficult to digest considering the current sentiment towards rising rates. And yet TLT was one of the few assets that were positive for the month returning +2.86% vs SPY at -2.74%. To the right you can see the performance table sorted by 1-month return as all strategies outperformed SPY due to the treasury hedge. The biggest winners for the month were the 3x UIS, adding 5% and the Nasdaq 100 adding 3.32% to reach a respectable 8% for the year. Worst performers were the two BUG strategies losing -0.58% and -0.79% and the MYRS losing -1.50% and remaining at a large drawdown year-to-date. We wish you a happy Easter and a healthy and prosperous 2018. Logical Invest, April 1, 2018 Strategy performance overview: Visit our site for daily updated performance tables. 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) Follow my blog with Bloglovin

Logical Invest Investment Outlook March 2018 Our top 2018 investment strategies, year-to-date : The NASDAQ 100  strategy with +4.55% return.   The Universal Investment strategy with +1.45% return.  The Global Sector Rotation strategy with +0.58% return. SPY, the S&P500 ETF, returned +1.79%. News: Strategy update: Our updated hedge now allocates to Treasuries, Gold or to a short US sector position. The hedge does not use currency ETFs anymore, which were conflicting with common 401k / IRA guidelines. Market comment: February proved to be a difficult month. Although our last newsletter started with a word of caution, we were surprised by the unprecedented move that followed: The volatility index spiked in such a way that caused massive losses to some of the industry's most popular volatility ETFs. Three major volatility ETFs were halted and two of them (XIV and SVXY) were permanently de-listed. We experienced the move first hand as we were trading VIX futures at the time. Our MYRS strategy, which is based on the ZIV ETF (VIX mid-term futures, 4th-7th month) took a large hit at -25%. The more popular XIV ETF (VIX front-term futures) lost more than 80% of it's value and was withdrawn from the market (see Frank 2013 article : Why we invest in ZIV and not in XIV). The SP500 experienced a quick 10% fall but has partially recovered. Our strategies, except MYRS, have somewhat recovered, the worst showing a year-to-date performance of -3.92%. This number of course does not reflect what happened in reality as many investors considered exiting the market. And for good reason: UIS 3x saw a -25% drawdown from it's all time high (-11.8% for the month) on February 8th. Today's -3.92% YTD number seems manageable but only in hindsight. The return (with a vengeance) of volatility has somewhat obscured the continued weakness of the most important [...]

Logical Invest Investment Outlook February 2018 Our top 2018 investment strategies, year-to-date : The Leveraged Universal strategy with +8.93% return.   The NASDAQ 100 strategy with +8.59% return.  The U.S. sector strategy with +4.39% return. SPY, the S&P500 ETF, returned +5.64%. News: QuantTrader Light is available to all subscribers, even to single strategy ones. Just download a copy and login with your LI username/password. Depending on your subscription level you will be able to access the corresponding strategies. This gives you the opportunity to update your portfolio during the last day of the month. Major strategy update: Leveraging on our multi-strategy framework, Frank created a new Hedge strategy that includes Gold. The new Hedge is included in most of our strategies and helps decrease Treasury exposure. Read more in our detailed article. QuantTrader version 510S has a new backtester build into the consolidation tool. You can now check how a portfolio of strategies would have performed in the past. 4 new videos will guide you on how to use the portfolio builder and the QuantTrader consolidation tool to issue signals as well as use the Interactive Brokers portfolio rebalancing tool. We hope to publish more videos in the coming months. Feel free to tell us your preferences. Market comment: This month's newsletter comes with a word for caution. The S&P 500 has risen in a parabolic fashion this past month. Sentiment has turned highly positive and most market players are sitting on profits. This is all good but we think we need to prepare for a new, slightly inflationary environment that may prove challenging to navigate through. Rising inflation is already reflected in the 10-year Treasury yield reaching 2.7% . The question is how will higher borrowing costs affect small to medium businesses, some of which rely on cheap credit. Loss of profitability for these companies could trigger a correction [...]

Logical Invest Investment Outlook January 2018 Our top 2017 investment strategies: The Maximum Yield strategy with 64.84% return. The Leveraged Universal strategy with 49.13% return.   The NASDAQ 100 strategy with 28.30% return. SPY, the S&P500 ETF, returned 21.70%. News: All-Strategy subscribers will be able to use QuantTrader 'Light' at no additional charge. Market comment: As we mentioned in our year-end review, the past year was characterized by large returns in U.S. and foreign markets and sustained low volatility despite an increase in geopolitical risk. The S&P 500 (ETF: SPY) returned 21%, Europe (ETF: FEZ) 24% and emerging markets (ETF: EEM) 37%, It is also the year where the U.S. Federal reserve stopped it’s 10-year balance sheet and increased short-term interest rates. Long term treasuries (ETF: TLT) as well as emerging bonds (ETF: PCY) managed a +9% while U.S. corporate bonds (ETF: AGG) barely touched 4%. Despite the announced tightening, the U.S. dollar lost ground: -13% against the Euro and -12% against gold. The most exciting financial event of the year is the attempt to include cryptocurrencies as a new asset class into the mainstream financial system. Looking at our strategies, our top performers were our riskier strategies: MYRS, UIS 3X and the Nasdaq 100. This is in line with the market being almost ‘perfect’ for 2017 and having very few corrections which benefits pure risk taking. This may or may not continue in 2018 as there are signs of caution: Central banks are slowing down or reversing stimulus programs and real world costs of goods, especially outside the U.S., are rising. 2017 was characterized by the astounding rise of cryptocurrencies, which we have been tracking since May. Bitcoin futures are now available to mainstream traders through Interactive Brokers (via CBOE and CME). Interestingly you need a whopping $50,000 margin to short 1 Bitcoin. For longs, the margin is [...]

Logical Invest 2017 Year In Review Overview: 2017 was another excellent year for our strategies with double digit returns and very low volatility. Although world economic data are positive, central bank tightening and possible rate increases may warrant more conservative approaches. We provide a basket of strategies to accommodate. Here are some of the best for this year: The Maximum Yield Investment strategy (+64%) The maximum yield was our very first quantitative strategy. It was first traded using VIX futures in order to collect mid-term volatility premium. It was then adapted to use ETFs. In the chart below you can see the theoretical backtested results before 2013 (left of the first line) and the live results to the right of the first line. The strategy was again improved in 2014 adding a variable Treasury component. It has performed in line with expectations. 2017 was an exceptional year with +64% return. MYRS History to 2108 The Universal Investment Strategy (+14.34%, Leveraged version: +49.13%) The strategy is an intelligent and dymamic version of the 60/40 equity/bond strategy. It was built with the 2008 crisis in mind where a  shift into bonds would have limited any catastrophic portfolio losses. As you can see from the graph, the live performance (after 2014) is in line with the backtested results. In 2015, where most investors lost money, it remained flat. It has yet to be tested in an extreme bear market. In 2017 we improved the strategy so as to dynamic allocate to TIPs (inflation protected Treasuries) in case interest rates start rising (causing Treasuries to underperform). 2017 performance was 14.34%. The  leveraged version of this strategy using 3x ETFs returned 49.13%. Logical Invest The Universal Investment Strategy 2017 Bond Substitution Strategies Many investors prefer the security and safety of [...]

Logical Invest Investment Outlook December 2017 Our top 2017 investment strategies, year-to-date: The Maximum Yield strategy with 51.57% return. The Leveraged Universal strategy with 43.37% return.   The NASDAQ 100 strategy with 29.84% return. SPY, the S&P500 ETF, returned 20.25%. News: Our strategy development software QuantTrader has been updated and can once again fetch intraday prices. Market comment: November was another positive month for the S&P 500 with the index gaining +3.06 %. More risk-sensitive indicators such as the Russell 2000, emerging markets indexes as well as high yield and foreign bonds showed increased volatility and signs of weakness. This may be due to expectations of coming inflation and interest rates hikes rather than economic factors. U.S. Treasuries gained 0.74% but still remain weak. Gold remains flat adding +0.36% for the month. Our strategies experienced some volatility mid-month but eventually recovered. Our best performer was the leveraged Universal Strategy (UIS 3x) with 6.70% as both SPY and TLT returned gains. Our worst performer was the World Top 4 (WT4) strategy shedding -2.39% mostly due to the Chilean ETF dropping -12.1%. Our enhanced permanent portfolio strategy (the "BUG") added a 0.7%, the Global Rotation Strategy added 1.63% and our Nasdaq 100 strategy managed 0.39% for the month despite some larger moves in it's individual allocations (LRCX -7.79%, ISRG +6.51) . Our Maximum Yield strategy reminded us that it can experience large corrections as volatility turned up mid-month only to recover later and end up with a slight (-0.62%) loss. MYRS remains above the 50% for the year. Christmas and New year's have always been kind to investors. This year, with the S&P500 already at +20% year-to-date we are curious if the market will once again reward risk takers. Either way we follow our models and keep a diversified and balanced exposure to the markets. We end this newsletter with a look at crypto-currencies. When we first [...]

Logical Invest Investment Outlook November 2017 Our top 2017 investment strategies, year-to-date: The Maximum Yield strategy with 52.51% return. The Leveraged Universal strategy with 34.36% return.   The NASDAQ 100 strategy with 29.34% return. SPY, the S&P500 ETF, returned 16.68%. Market comment: Just like September, October was positive for the S&P 500. The index gained +2.36% continuing its multi-month rise to new highs. U.S. Treasuries did not manage to recover after last month's losses, staying almost flat at -0.04%. Gold showed weakness returning -0.75%. Our strategies recovered quite well as they shifted weights into equity and decreased or replaced treasury positions with inflation protected notes (TIP) and convertible bonds (CWB). Our Nasdaq 100 strategy returned +7.81% for the month, while the Maximum Yield strategy added 5.94% passing the 50% return mark for 2017. Our leveraged Universal Strategy (UIS 3x) added 4.68%. Our Global Market Rotation (GMRS) and World Top 4 (WT4) strategies added 2% each. As our subscribers may remember, we recently updated the hedging mechanism of our strategies. In an article posted on December 2016, Frank explained why we are moving into a more dynamic hedging of the equity component by allowing strategies to choose from inflation protected Treasuries (TIP) as well as other types of bonds. This was done in anticipation of possible under-performance of Treasuries due to the Fed's normalization policy. These strategy "upgrades" are now working and paying off as our Universal Investment strategy has already shifted to TIPs and our other two strategies to convertible bonds. We are entering the traditionally best performing months of the year. Seasonally, equity markets exhibit some type of correction during the summer, followed by a volatile and often bearish September and October. Typically they end the year with strong November-December performances. This year we only had a minor correction back in August but no corrections since then. The index [...]