Open positions, new signals and performance of six trading strategies for week of March 9, 2020. A commentary is included. Access to article requires Market Signals subscription.
- Average year-to-date return of the six strategies is -1.5%.
- Three strategies are down and three are up YTD.
- Rotation strategies had gains due to rally in GLD and TLT.
- Equity long/short is best performing strategy, +6.9% YTD.
- Trend-following and mean-reversion strategies are in the red.
Year-to-date, the average return of the strategies is -1.5% while S&P 500 index is down 8%.
There were left and right tail events in the stock and bond markets this week. Our scenario from last week of early rebound followed by selling pressures materialized:
It is highly likely that volatility will remain elevated. There may be a rebound early next week but the direction of prices will depend on whether investors will perceive that as opportunity to sell.
Equity long/short remains best performing strategy with 6.9% year-to-date return. Rotation strategies did well this week due to rallies in TLT and GLD.
Trend-following and mean-reversion are struggling due to lack of persistent rebound.
Among all the other new signals for next week, one strategy will sell SPY on the open of next week but another will buy the same ticker so overall the structural hedge will be preserved.
It is hard to make forecasts and this is why we believe strategies are important in times of turmoil. Forecasts beyond a week or two usually demonstrate lack of experience. The key is a hedged strategy with a small positive bias if possible. Anything else is reckless speculation in our opinion; some may win big but some others will lose big if not everything.
Stay safe, these are uncertain times that may cause a lot of pain and not only in markets, but eventually normality will return, let us hope soon.
Positions as of close of 03/06/2020
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