Bend but Don't Break - November 2018Submitted by Elite Asset Management on November 20th, 2018
Dear Fellow Investor,
October was not a good month as the S&P 500 had a mini-crash and an ‘official’ correction touching the -10% mark from the September highs. Other markets followed the drop leaving many foreign markets in the red for the year. Our strategies were affected as well as they are designed to bend but not break, and you read more details below.
Our strategies use hedges to dampen the effect of corrections. Although the amount of hedging can vary, having even a small hedge is a drag on performance when equities do extremely well. This is what has happened this year as the SP500 has outperformed every other major asset, including most of our strategies. On the other hand the hedge should help lower draw-downs, which in turn helps achieve higher long-term returns. Creating a ‘hedge’ is not that simple, though. What used to be an excellent hedge, namely Treasuries, is now in question as a long term bear market on government paper is a possible scenario. To sum everything up both equities and long term treasuries sold off together and even though we took a short position in the S&P500 it was still not enough to offset all the losses.
Since mid October the current allocation for all strategies are not too long and not too short, which means that we haven't taken an overly large position either way. We are only moving approximately 25% of the daily S&P500 in either direction. By doing this we have removed a lot of volatility from our strategies and with the sell off today (11/20) we were only down 0.50%, while the S&P500 was down 1.82%. The next updates are coming at the beginning of December for the monthly strategies and then January for the quarterly strategies.
We will continue to follow our rule-based investment process that looks at the weekly, monthly, and quarterly moving averages and will make changes only when the trend changes.
Click below to view the performance on our website.
Latest blog Posts
Wishing everyone a Happy Thanksgiving!
What is S.M.A.R.T Asset Allocation?
We created a rule-based investment process that is S.M.A.R.T. As the investments are Strategic, helps our clients Maximize Gains, Adapts to current market conditions, manages Risk, and is Tactical.
It's still asset allocation only S.M.A.R.T-er.
Until next month.
Elite Asset Management is an SEC registered investment adviser (RIA). You should not assume that any discussion or information contained in this letter serves as the receipt of, or as a substitute for, personalized investment advice from Elite Asset Management. It is published solely for informational purposes and is not to be construed as a solicitation nor does it constitute advice, investment or otherwise.
*S&P 500® Index
The S&P 500® Index is a free-float market capitalization-weighted index of 500 of the largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.
**Inception is as of 10/31/16 as the strategies were drastically different prior to this date.
Performance results are shown gross of fee's, the above returns would be reduced by when fee's are included. The maximum fee rate is 1.15% per year (12 months). Due to differences in actual account allocations, account opening date, timing of cash flow in or out of the account, rebalancing frequency, and various other transaction-based or market factors, a client’s actual return may be materially different than those portrayed in the model results. Investing entails risks, including possible loss of principal, past performance is no guarantee of future results. The information provided may contain projections or other forward-looking statements regarding future events, targets or expectations, and is only current as of the date indicated. There is no assurance that such events or targets will be achieved, and may be significantly different than that shown here. The information presented, including statements concerning financial market trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons.