Sector Rotation

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Enhancement of the Treasury hedge in our strategies

For many years, most of our strategies used long term Treasuries (TLT, TMF) as a hedge against market corrections. These Treasuries have been a safe haven asset with negative correlation to the stock market and have been used successfully to reduce the risk/volatility of our strategies. With rising rates and inflation, long term treasuries lose a part of their value as a safe haven asset. Their hedging value depends mainly on the speed interest rates go up. If rates go up slowly and inflation stays low, then ETFs like TLT will still be a good hedging choice. To be on the safe side we diversified our strategy hedge.   Universal Investment Strategy UIS Our U.S. based Universal Investment Strategy UIS will have a hedge that can now choose between TLT and TIP. TIP is a very liquid inflation protected Treasury. TIP is less volatile than TLT and is a good alternative when TLT is heading lower. Here is a 10 year comparison between TLT (lower red chart) and the hedging algorithm which switches between TLT and TIP (lower black chart). In the year to date chart you can see how the allocation switches between TLT and TIP. Since October the hedging strategy is invested in TIP. The new UIS strategy allocates between SPY and the TLT/TIP hedging strategy. The annual return (CAGR) for the last 10 years has been 12.06% with a Sharpe ratio of 1.4. This compares with the performance of the original UIS strategy of CAGR 9.5% and Sharpe 1.1. So there is a clear improvement for the new strategy.   The Bond Rotation Strategy BRS The Bond Rotation Strategy BRS will be improved by also adding TIP as a 5th ETF. BRS did very well this year with a year to date performance of 11.36% and [...]

2017-03-14T22:11:10+00:00 By |39 Comments

The Logical-Invest monthly newsletter for September 2016

Special topic this month: Passive Investments Logical Invest Investment Outlook September 2016 Our top year-to-date strategies: The Leveraged Universal strategy with 39.09% return. The Maximum Yield strategy with 34.04% return.  The World Top 4 with 20.51% return. SPY, the S&P500 ETF, returned 7.73%, year-to-date. New tools: The Online Custom Portfolio Builder The Consolidated Signals tool. Market comment: The summer market showed strength compared to its seasonal bias. The old saying "Sell in May and go away" did not hold up this year as SPY rose 5% and emerging markets jumped 8% during the summer. We are now moving into the fall season with the SPY near all time highs and the VIX index at very low levels. September and October have, historically, been good entry points for equity investors that led them to bullish end-of-year returns. This coupled with the election cycle are all market positive factors. Whether a correction materializes in the next two months is anyone's guess. Our strategies are partially hedged with treasuries and should be able to handle such a correction better than buy and hold. In regards to strategy performance, not much changed during August. Our top two strategies remained flat, holding on to their exceptional YTD returns of 34% for MYRS and 39% for 3x UIS. Our average return of all our strategies is at 16.7%. August's winner was the Bond Rotation strategy, adding 2%, reaching a very respectable 12% for the year. Interestingly TLT lost 1%, another example on how our BRS bond strategy is not always correlated to the long term Treasury ETF. Last month's BRS positions in emerging market credit (PCY) and U.S. high-yield (JNK) did pay off.  The worst performer was our Global Sector Rotation, loosing 3% for the month. For September we favour our BUG strategy, the World Top 4, the Gold-USD and our stable Universal Investment Strategy. All=Strategy subscribers can read about our new tools can help allocate across strategies. We wish you a healthy and profitable September. Logical Invest, August 31, 2016 Strategy [...]

2017-03-11T22:20:21+00:00 By |11 Comments

The Logical-Invest monthly newsletter for August 2016

Logical Invest Investment Outlook August 2016 Our top year-to-date strategies: The Leveraged Universal strategy with 40.6% return. The Maximum Yield strategy with 34.3% return.  The World Top 4 with 20.6% return. SPY, the S&P500 ETF, returned 7.6%, year-to-date. News: Our in-house software is available for licensing to professional clients. We are looking for registered investment advisers and wealth managers to partner with.   Market comment: Sentiment across mainstream media remains cautious despite the S&P500 index breaking to a new all time high, on July 8th. Many investors continue to perceive both the S&P and Treasuries as overpriced and due for a correction. Increased geopolitical risk includes the recent coup attempt in Turkey and a highly unstable environment in Syria. Europe has somewhat recovered from the Brexit shock only to find itself in a new controversy over troubled Italian banks. The ECB is continuing the controversial path of negative rates policy and widespread corporate bond purchases. Increasingly low yields have many wealth advisors prepare their clients for an era of lower future returns while they issue warnings of increased volatility. Short term traders remain baffled at this somewhat 'unresponsive' market, where neither the Turkey failed coup or the news from Italy have managed to 'spike' the VIX, which has steadily crawled down to a low 11.8. And yet we are enjoying a wonderful year. Our top two strategies continue to provide handsome returns: 34% for MYRS and 40% for 3x UIS. Our average return of all our strategies is 15.8%. July was most kind to our Nasdaq 100 strategy as it recovered 9.5% from a recent correction. It is up 13.8% for the year. Our current leaders, the MYRS and 3x UIS strategies continue on to higher profits with July returning 8.6% and 7.8% respectfully. The World Top 4 strategy follows with 7.1%. The BUG leveraged added 3.7% and is up 15% for the year. Our core conservative UIS is at a respectable 12.9%. Looking at 3 month Sharpe ratios, we get a similar picture: The winners in risk adjusted performance [...]

2017-03-11T22:16:44+00:00 By |0 Comments

Logical-Invest review @ Daily Fintech

With a lot of hype about FinTech these days, we´re happy to have received a positive review from one of the most important FinTech blogs. What is FinTech? Here the definition of FinTech by Investopedia: Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century. Originally, the term applied to technology applied to the back-end of established consumer and trade financial institutions.             A review of Logical Invest by Efi Pylarinou @ Daily Fintech "Logical-Invest offers actionable portfolio solutions: Simple and Intelligent" "They provide you with 100% actionable advise." "You can pick a monthly subscription or an annual subscription to one of their core strategies and pay less than 3 shares of Apple (for the year)." "Financial advisors are natural users of such tools and they typically, subscribe to all the Logical-Invest products. Retail investors are also using the single strategies because they are relatively simple and fit in every portfolio." Read the whole article in Daily FinTech here:   Logical-Invest offers actionable portfolio solutions; Simple and intelligent. By Efi Pylarinou Looking for a quant edge in your investing strategies? Logical-Invest already has 8 off-the-shelf strategies that you can “grab” and use. Logical-Invest is not an investment advisor and will not manage your money. They provide you with 100% actionable advise. You can pick a monthly subscription or an annual subscription to one of their core strategies and pay less than 3 shares of Apple (for the year). Logical-Invest was founded by four partners that bring a lot of experience in financial markets, quantitative fields (engineering), and business. They started by introducing a sharing platform of their own strategies for investing. Logical-Invest sprung out of this, less than six months ago. The team is putting their money where their mouth [...]

2017-03-14T22:06:06+00:00 By |0 Comments

The Logical-Invest monthly newsletter for January 2016

Logical Invest Investment Outlook January 2016   Market comment: With December 2015 behind us, we have now ended one of the most challenging investing years. The US stock market ended flat for the year. All other assets like precious metals, bonds, commodities and emerging markets gave negative returns. For the past 20 years, including the 2008 subprime crisis year, we always had at least one asset group going up considerably (10% or more). Here is an interesting article about 2015: http://www.bloomberg.com/news/articles/2015-12-28/the-year-nothing-worked-stocks-bonds-cash-go-nowhere-in-2015 For trend following strategies this meant trying to intelligently switch from a ‘worse’ to a ‘less worse’ asset class. Except for the U.S. dollar index, there was no well performing asset for the strategies to ‘hop’ on. The big exception was the stock-picking Nasdaq 100 strategy. It seems that even if a whole market is flat, there are still some high-flying company stocks. The Nasdaq 100 strategy did successfully catch some of those and out-performed the market. We hope this will continue in 2016. One reason for 2015 being such a difficult year, was the strong U.S. dollar. Against the Euro, the US$ was up nearly 11%. Commodities and precious metals were hammered down to levels unseen since the 2008 crisis. All foreign assets in our strategies had to bear an equal 11% loss if they were not currency hedged. This was a huge drag for all strategies with global assets, like World Top-4 countries, Global Market Rotation Strategy, Sector Rotation, BUG. It seems that since Draghi’s latest ECB minutes the strength of the dollar has at least normalized a little bit. Although it is near impossible to make statistically good predictions about currency trends, we do think global strategies will recover and do better in 2016. Another problem for trend followers was that the 2015 trends were not due to market cycles [...]

2016-11-03T05:58:56+00:00 By |0 Comments

The Logical-Invest monthly newsletter for July 2015

This is the monthly monthly Logical-Invest newsletter for July 2015.  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 WORLD-TOP4 284.82 8.27 0.85 -1.21 0.68 12.57 0.69 0.43 3.01 3.24 MYRS 615.56 5.11 1.02 -1.80 0.53 14.39 0.69 0.42 1.11 2.85 GMRS 4296.50 3.77 -3.35 -1.76 0.12 8.81 0.86 -2.20 -0.06 1.65 UIS-SPXL-TMF 5728.03 3.73 -8.22 -6.90 0.51 24.99 0.89 -1.63 2.25 2.85 GSRLV 480.78 1.72 -4.02 -2.76 0.32 8.75 0.76 -2.53 1.14 2.16 UIS 464.10 1.62 -2.46 -2.24 0.10 8.31 0.88 -1.69 2.24 2.71 SPY 205.85 1.09 0.20 -2.03 0.18 10.42 1.00 0.12 0.90 2.41 BRS 247.10 -0.06 -2.44 -2.70 0.48 6.60 0.60 -2.29 0.72 2.53 AGG 108.78 -0.34 -1.83 -1.08 -0.06 3.98 -0.17 -2.54 0.75 0.77 BUGST 213.42 -2.00 -3.33 -2.75 0.10 6.24 0.51 -3.10 0.53 2.29 BUGLEV 275.08 -2.03 -2.96 -3.28 0.11 8.31 0.52 -2.06 0.28 2.02 GMRSE 5963.55 -2.37 -7.75 -2.34 0.37 12.60 0.51 -2.99 -0.49 2.35 GSRAG 486.93 -5.21 -4.80 -4.22 0.46 15.81 0.78 -1.56 -0.47 1.70 TLT 117.46 -5.76 -9.56 -4.07 -0.63 16.56 -0.32 -2.61 0.64 0.03 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 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) Market comment: Global equity markets sold off these last days of June because of Greece “Grexit” fears. Unfortunately these last two days have been enough to change the positive monthly performance of most strategies into a negative one. For [...]

2017-02-19T22:50:27+00:00 By |0 Comments

Logical Invest Strategy Performance for 2014

Dear investors, In general 2014 was quite a difficult year for investors, so we want to summarize and comment our strategy performance. Apart of the US market, all global markets finished the year with negative performances. SPY 13.46% (S&P 500 US market) FEZ -9.75% (Euro Stoxx 50) EEM -3.89% (MSCI Emerging Markets) EPP -1.92% (MSCI Pacific ex-Japan) ILF -12,29% (S&P Latin America) AGG 5.99% (Core Total US Bond (5-6yr)) Our Strategy Performance See here for a most recent Strategy Performance overview. However, most of the negative performance of these foreign market ETFs is due to the strong US$. The Euro lost 12% on the US$ and the US$ index UUP is 10% higher.  In fact, the USD/EUR hedged DBEU (MSCI Europe) ETF had a +4% performance, which is nearly 15% better than the USD denominated FEZ.  It is very difficult to forecast the influence of exchange rates on our strategies.  All this is driven by the Yellen and Draghi, but longer term, a strong US$ will make European and Asian markets more competitive.  So, we will probably see a rotation away from the US market to some foreign markets at some point. In spite of the global weakness and currency dislocations, the rotation strategy performance came through flat to up nicely for the year, and all had a strong year with hedging.  We had 5 intermediate short market corrections, which typically had a 2 week pullback of up to 10% and then a very fast recovery.  This sort of whipsaw market is not ideal for our rotation strategies.  At least for the old style of rotation strategies which always switched 100% between stock market ETFs and treasuries.  2014 was also a very strong year for treasuries, which again proved all analyst forecasts wrong. The 20% treasury hedge which I promoted since February 2014 had a very positive [...]

2017-02-19T20:35:36+00:00 By |7 Comments