As always feel free to ask me any questions on your mind and if it’s something that I feel other people would like to hear the answer to I’ll throw it in a daily blog. We’ve got one here from Jennifer that’s interesting:
“It looks like all the major asset classes are down in 2018. Do you think this signals a major regime change?”
Typically when we talk about the “major asset classes” it usually means stocks bonds gold and real estate because these are the ones that the bulk of investors hold. We can always divide it further and include global equities, high yield or corporate bonds, oil or other commodities, the US dollar or other currencies, volatility, sub sections of the S&P like tech or financials, crypto etc. Not everything is down, but yes nearly all are underperforming so far in 2018.
So gold has managed a killer 0.76% return which puts it in the lead so far in 2018. Not very impressive right? And of course my business is called Volatility Trading Strategies for a reason so of course I consider volatility to be an asset class of it’s own.
Even if we exclude the massive gut punch in the after market on February 5th, SVXY and ZIV are still substantially down. Needless to say we’ve had very little to work with so far in 2018. Portfolio managers, hedge fund indexes, balanced index funds, they mostly find themselves negative so far in 2018. It’s been very rough to say the least.
Does this signal a major regime change? Well the problem with that is there’s no way to know until after the fact. I know right, brilliant! That’s like me saying let’s wait and see what happens and then I’ll tell you what happened. Very helpful! I could be a financial pundit on TV with that kind of verbal gibberish.
But honestly in my opinion that is the key to long-term investing success. Not ever making these kind of predictions. Not only is there nothing wrong with saying I don’t know, but it’s actually financially beneficial to do so. People who pretend they know what’s coming next are usually the ones that spend years spinning their wheels.
As I always say, we will continue to just trade the math and take what the markets give us. They’ve given us almost nothing to work with so far in 2018, but keeping my brain away from the market prediction game and just trading the signals as they come has allowed us to eek out some gains despite most everything being down. Nothing to write home about, but still keeping with my long-term goal of beating the markets during good times and bad.
Stocks bonds and gold on a buy and hold basis is basically flat. However with discipline and a willingness to move to safety positions at the first sign of trouble we’ve managed to avoid the bad days and keep pushing upwards.
Gun to my head, yes I’d probably say that markets going forward aren’t going to look anything like they did for the past 9 years since the financial crisis. If this is a “regime change” then yes I’d say we may be in the middle of one. But that doesn’t mean we can’t find opportunities. It’s just going to require more patience and a willingness to be in cash and wait for better entry points. And it helps a lot that all of our strategies have both bull market and bear market components to them.
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