For more information on the strategies, see here.
Stocks (SPY) gained 1.9% on the holiday-shortened week. Commodities (DBC) dropped 2.6% but ended the week significantly off lows. Gold (GLD) was down 3.6%. High Yield Corporate Bonds (HYG) gained 1.2%, but long-duration bonds (TLT) plunged by 2.9%. Year-to-date, DBC is up 25.5%. TLT is down the most, with a loss of 23.3%.
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.||-1.3%|
|Average weekly performance of the five strategies (excluding long/short)||-0.5%|
|Weekly change of S&P 500 index||+1.9%|
|Average YTD return including the long-short before the pause.||-4.2%|
|Average YTD return excluding the long-short.||-5.1%|
|YTD return of the S&P 500 Index (no dividends)||-18.2%|
|YTD return of 60/40 portfolio in SPY/AGG (annual rebalancing)||-14.7%|
|YTD return of PSI5 mean-reversion algo (performance for SPY, QQQ, and IWM)||-7.1%|
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 performance of the strategy without the volatility switch is shown below.
|Weekly performance of Dow 30 long-short strategy.||+1.1%|
|YTD return of the Dow 30 long-short strategy.||+3.1%|
|Average weekly performance of the six strategies (including long-short)||-0.2%|
|Average YTD return including the long-short strategy||-3.8%|
Next week, the allocation to strategies will be at 5.5%, while 94.5% of it will be in cash. Four strategies are out of the market, and the long/short strategy is in (optional) pause mode due to high volatility. Only one momentum strategy has open positions.
Last week I wrote:
The capital destruction due to economic conditions and high uncertainty continues. Forecasting short-term moves is an exercise in futility.
As a reminder, on June 9, the year-to-date return of DBC ETF was 46.9%. In 19 trading days to the close of July 8, the ETF plunged 14.6%. In the same 19-day period, GLD ETF dropped 6.8%, while SPY and TLT ETFs did not recover. The main beneficiary of capital destruction during this period has been cash (T-Bills) with the US dollar gaining 3.5%.
The predominant mode of operation of market participants so far this year has been “take the money and run.” Some traders, including CTAs, and primarily trend-followers, have realized and unrealized gains year-to-date but if the whipsaw continues there is a high probability the profits will evaporate or even turn into losses.
Comments about performance, positions, and the new signals report follow below.
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