Top strategies in January:
- The Leveraged Universal Investment strategy (3x UIS) up 6.1%.
- The Maximum Yield Strategy (MYRS) up 4.1%.
- The Leverged Gold-Currency Strategy (GLD-USD) strategy up 3.3%.
Our 2020 strategy outlook and strategy adjustments
A reminder that starting January 1 2020, we have implementing several modifications to our strategies to make them less volatile. The biggest modification concerns the Hedge sub-strategy to ensure proper diversification between equities and multiple safe-haven assets.
This worked out this month as most gains were in safe-haven assets: Treasuries up 7.7% and Gold up 4.5%. The S&P 500 came in flat at -0.04%.
For conservative folks that don’t like equity exposure, the updated Hedge sub-strategy can be used as a strategy in itself.
Supportive environment from central banks
On its January 23rd meeting the ECB stated that it remains committed to the current course of accommodation policy for the foreseeable future. On the 29th of the same month, the Federal Reserve (Fed) announced that it is keeping its benchmark interest rate range unchanged at 1.50% to 1.75% saying the current level is “appropriate to support sustained expansion of economic activity.” These decisions show continued support towards a positive environment for stock and bond markets in 2020.
Climate change – A new theme for a new decade?
Climate change has been in everyone’s agenta. Since last year’s European elections, it has been clear that a large part of the EU electorate will vote based on a party’s green agenta. Greta Thunberg has been invited to speak in Davos. Australia is burning and the world economic forum lists extreme weather and climate action failure as the number #1 and #2 global risks.
In ‘normal’ economies investment is meant to take less productive capital and redirect it to better use. Climate change may start being labeled as ‘better use’. Once governments embrace it and business find a way to adapt and profit, it will be a theme to keep in mind moving forward.
The forgotten Yield Curve is still here
I have been through the argument of a recession following an inverted yield curve, alas with delay. It has now been 10 months since the curve inverted and contrary to everyone’s beliefs back then, long-term rates are even lower. This risk is combated by accommodative policy and by U.S. politics as we are coming into a presidential election year. Still the risk of a recession is present and we are taking that into consideration as we adjust our hedging algorithm.