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Systematic Trading Update – July 10, 2023 [Premium Signals]

Photo by Alesia Kozik

The weekly systematic trading reports include a market recap, open positions, new signals, and the performance of six trading strategies.

Report Contents

1. Market Recap and Comments.
2. Ensemble Performance.
3. Positions and Performance of Strategies.
4. Signal Summary for Next Week.

1. Market Recap and Comments (July 3 – July 7, 2023)

The optimism and euphoria of the previous week quickly transformed into pessimism after strong unemployment data and the expectation of higher-for-longer interest rates. Stocks (SPY) fell 1.1% for the week. Long-duration bonds (TLT) were impacted the most and plunged 3.5%. Commodities (DBC) were up 1.2% due to gains in crude oil, gasoline, and precious metals. The US dollar index (UUP) fell 0.5% despite expectations of higher rates. International stocks (VEU) were down 1.6%.

Year-to-date, stocks (SPY) are up 15.5%, gold (GLD) has gained 5.3%, commodities (DBC) are down 6.8%, the US dollar (UUP) has advanced 1.5%, bonds (TLT) are up 1.1%, and international stocks (VEU) have gained 8.2%.

The ensemble of the six strategies fell 0.5% for the week. Systematic tactical allocation and cross-section momentum strategies came under pressure. The commodity ETF long-short strategy ended the week with a small gain.

Last week, I wrote:

The stock market is rallying, but the bond market is cautious. Inflation is still high, and surprises are possible.

Uncertainty is rising and has impacted most of the fixed-income market. It is not yet clear whether stocks will have another correction or whether stronger-than-anticipated nominal growth will support prices. In the late 1970s, stocks made new highs after an initial decline, even as inflation rebounded. The discounting mechanism is highly non-linear, and most forecasts have low significance due to market complexity. A good ensemble of strategies may offer lower risk but a lower returns. There are tradeoffs, and there is no easy shortcut.

2. Ensemble Performance

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Charting and backtesting program: Amibroker. Data provider: Norgate Data

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