For more information on the strategies, see here.
The holiday-shortened week delivered a stock market rebound. Stocks (SPY) surged 6.6%. Commodities (DBC) dropped 3.3%. Gold (GLD) was down 0.7%. High Yield Corporate Bonds (HYG) gained 1.3%, but long duration bonds (TLT) were up only 0.4%. Year-to-date, DBC is up 33.3%. TLT is down the most, with a loss of 23.5%.
Below is a weekly performance recap, including year-to-date performance and a comparison to popular benchmarks and the PSI5 mean-reversion strategy.
|Average weekly performance of strategies with open positions.||-0.9%|
|Average weekly performance of the five strategies (excluding long/short)||-0.4%|
|Weekly change of S&P 500 index||+6.6|
|Average YTD return including the long-short before the pause.||-3.5%|
|Average YTD return excluding the long-short.||-4.2%|
|YTD return of the S&P 500 Index (no dividends)||-17.9%|
|YTD return of 60/40 portfolio in SPY/AGG (annual rebalancing)||-14.6%|
|YTD return of PSI5 mean-reversion algo (performance for SPY, QQQ, and IWM)||-6.4%|
The Dow 30 long-short strategy was paused on March 7, when the positions were closed due to the activation of a volatility switch. The strategy without the optional switch was up 3.5% by the close of Thursday with all long and short positions gaining, but due to the rally on Friday, it ended the week with a gain of 1.4%.
|Weekly performance of Dow 30 long-short strategy.||+1.4%|
|Average weekly performance of the six strategies (including long-short)||-0.2%|
|Average YTD return including the long-short strategy||-2.9%|
Next week, the allocation to strategies will be at 14%, while 86% of it will be in cash. Three strategies are out of the market, and the long/short strategy is in (optional) pause mode due to high volatility. Only two momentum strategies have open positions.
Many traders believe the rebound in equities was a bear market rally. Some other traders believe the reversal in commodities was due to crowded trades and profit-taking. The truth is that no one knows what will happen next. Everyone is trying to promote their book. Analysts who think macroeconomics can explain short-term market moves are the most deluded. CTAs and other long-term traders had long determined that analyzing the markets was an exercise in futility and had developed strategies as far back as the 80s. Social media has given a platform to many people who lack this fundamental understanding and think they are smarter than the markets. Systematic traders profit from the delusions of these discretionary traders.
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