Cumberland Advisors Market Commentary – 3Q2019 Review – Market Volatility ETF

Author: Leo Chen, Ph.D., Post Date: September 26, 2019

Although the S&P 500 made new highs after the Federal Reserve cut interest rates in 2018 for the first time since the Great Recession, the hawkish rate cut was not enough to sustain the market rally, which was derailed by additional tariffs that President Trump announced on August 1st on $300 billion of Chinese imports.

Leo Chen, Ph.D.


The Dow saw a 600-point swing on August 1st and ended up dropping 2.6% for that week. The broad market benchmark S&P 500 decreased 3.1% for the week as well, marking its worst week of 2019. We took advantage of the rising volatility and became fully invested at the end of August. But we remain cautiously bullish in the short term, as there are still uncertainties with the trade tension between the US and China.

Interestingly, the CBOE Volatility Index (VIX) has fallen to the 14-15 range after briefly topping 20 during the sell-off in August. In our opinion, VIX had been suppressed by the relentless market rally until the latest tariff announcement this year. To put everything in perspective, the historical average of VIX is approximately 19, meaning the VIX in August was only slightly above the center of the spectrum. Therefore, 2019 has been a year of low VIX so far. Even though October tends to experience some rising volatility historically, we may not witness as much action if there is any improvement in the trade deal.

It was in August, when trade-war tensions were especially high, that we launched a new Sector Alpha Portfolio. The new strategy uses the same quantitative analysis as the Market Volatility Portfolio does, but Sector Alpha rotates between defensive and cyclical sectors per market trends. If you would like any information on the new strategy, please feel free to reach out to me.

Leo Chen, Ph.D.
Portfolio Manager & Quantitative Strategist
Email | Bio

Links to other websites or electronic media controlled or offered by Third-Parties (non-affiliates of Cumberland Advisors) are provided only as a reference and courtesy to our users. Cumberland Advisors has no control over such websites, does not recommend or endorse any opinions, ideas, products, information, or content of such sites, and makes no warranties as to the accuracy, completeness, reliability or suitability of their content. Cumberland Advisors hereby disclaims liability for any information, materials, products or services posted or offered at any of the Third-Party websites. The Third-Party may have a privacy and/or security policy different from that of Cumberland Advisors. Therefore, please refer to the specific privacy and security policies of the Third-Party when accessing their websites.

Sign up for our FREE Cumberland Market Commentaries

Cumberland Advisors Market Commentaries offer insights and analysis on upcoming, important economic issues that potentially impact global financial markets. Our team shares their thinking on global economic developments, market news and other factors that often influence investment opportunities and strategies.

cumber map
Cumberland Advisors® is registered with the SEC under the Investment Advisers Act of 1940. All information contained herein is for informational purposes only and does not constitute a solicitation or offer to sell securities or investment advisory services. Such an offer can only be made in the states where Cumberland Advisors is either registered or is a Notice Filer or where an exemption from such registration or filing is available. New accounts will not be accepted unless and until all local regulations have been satisfied. This presentation does not purport to be a complete description of our performance or investment services. Please feel free to forward our commentaries (with proper attribution) to others who may be interested. It is not our intention to state or imply in any manner that past results and profitability is an indication of future performance. All material presented is compiled from sources believed to be reliable. However, accuracy cannot be guaranteed.