Coronavirus Watch: Hoping and praying these charts and stats keep improving. This continuing human tragedy is truly heartbreaking.
To gain a different perspective on the pandemic, let's take a look at a few stats. The chart above shows an important stat that is rarely discussed. Instead of total cases, this chart just depicts those global cases that are categorized as serious or critical. This can be a more realistic picture of what we're facing.
Below is a stat from a statistics aggregator as they collect data from all over the world. The color-coding makes it easy to read. Focus on the yellow number column and look for the United States. As of today, out of 327 million people in our country, there are two serious cases.
The market is extremely oversold... and it happened way too fast
We typically see these levels near short-term bottoms, but this time around we may be in for very high volatility. The chart below is the % of S&P 500 stocks that are above their 40-day moving average. You can see how we’re now at the lows set at the depths of the financial crisis.
The market is like that – Three steps forward, one step back. But, who wouldn't say it's worth it? Look at the bar chart with those different index returns since the bull market began. Relatively speaking, even the S&P 500 line chart shows a moderate drop compared to what was gained. It’s always gut-wrenching during the “one step back” part, but we think the best way to make solid returns over the long haul is to be invested as much time as possible…with downside risk management processes in place.
Most Optimus strategies have gone defensive
Both Tactical Bond and Tactical High Yield, with their very sensitive sell triggers, got out of riskier high yield bonds in late February. Since then, Tactical Bond has shifted between cash and US Treasuries, while Tactical High Yield has stayed in cash. World Dynamic Equity recently went to a 100% cash position.
Here’s a quick look at our two most popular strategies, listed in order of sensitivity to corrections:
Tactical Bond: Today (3/12/2020), we sold all US Treasuries and took up a 100% money market position. The strategy continues to perform extremely well, especially in this environment. It is up nearly 3% net YTD and is up over 8% net during the past 12-months, while the S&P is solidly in the red.
Dynamic Equity: The strategy tries to keep investors in as long as possible, so it is still fully invested. Due to their relative strength vs. the S&P 500, we recently loaded up on large cap growth ETFs. That has helped the strategy fall less than the market. Be that as it may, watch for our next update to see if a big shift has taken place.
Tired of the volatility? Watch for new downside risk-sensitive strategies coming soon
We've spent months designing new equity-based strategies and are just now putting the final touches on. We hope these will strike a balance between wanting solid risk-adjusted returns, but being more concerned about downside risk protection than performance. Just as in life, everything has trade-offs. So, we'll soon be offering both performance driven strategies like Dynamic Equity and new strategies that exit much more quickly in down markets. Stay tuned.
Watch out for falling bond funds
Did you know that bonds have bear markets too? Because of what's been happening in the markets, we thought now would be a good time to dust off a chart we showed many years ago. We were surprised to see plain vanilla intermediate-term bond funds get hit hard this week, some huge ones being down -8.5% in just a few days!
Everyone is used to the idea that bonds typically go up when stocks fall, or that's what we've always believed. Unfortunately, that is not always the case. We believe tactical fixed income strategies are now more important than ever.
For more information, please contact us via email, phone or chat.
Optimus Advisory Group manages liquid tactical and alternative investment strategies that meet the needs of our clients. We use a disciplined, quantitative methodology to build and manage our portfolios.
Over a full market cycle, these strategies are designed to provide superior risk-adjusted returns while maintaining a low-correlation to traditional market indices.
All strategies are net results after subtracting a 1.50% annualized fee.
The performance results shown include the reinvestment of dividends and other earnings. Comparison of the Optimus Advisory Group Programs to any other indices is for illustrative purposes only and the volatility of the indices used for comparison may be materially different from the volatility of the Optimus Advisory Group Programs due to varying degrees of diversification and/or other factors. Different types of investments involve varying degrees of risk and there can be no assurance that any specific investment will be profitable. Optimus Advisory Group does not make any representation that the Optimus Advisory Group Programs will or are likely to achieve returns similar to those shown in the performance results in this presentation. Optimus Advisory Group reserves the right to trade different funds within their models.
The historical S&P performance results (and those of all other indices and index funds used as proxies for indices) are provided exclusively for comparison purposes only, so as to provide general comparative information to assist an individual client or prospective client in determining whether the performance of the Optimus' portfolio meets, or continues to meet, his/her investment objective(s). It should not be assumed that any Optimus portfolio holdings will correspond directly to any such comparative index.
Different types of investments and/or investment strategies involve varying levels of risk, and there can be no assurance that any specific investment or investment strategy (including the investment strategies devised or undertaken by Optimus Advisory Group) will be profitable for a client's or prospective client's portfolio. All performance results have been compiled solely by Optimus Advisory Group and have not been independently verified.
Performance results reflect hypothetical results that were achieved by means of the retroactive application of a back-tested model and, as such, the corresponding results have inherent limitations, including: (1) the model results do not reflect the results of actual trading using client assets, but were achieved by means of the retroactive application of each of the above referenced models, certain aspects of which may have been designed with the benefit of hindsight; (2) back-tested performance may not reflect the impact that any material market or economic factors might have had on the adviser’s use of the model if the model had been used during the period to actually manage client assets; (3) for various reasons (including the reasons indicated above), clients may have experienced investment results during the corresponding time periods that were materially different from those portrayed in the model.
The Optimus performance results do not reflect the impact of taxes.
Advisory Services offered through Optimus Advisory Group, a Registered Investment Advisor.
