4Q 2019 Review: Market Volatility / Leveraged Volatility / Sector Alpha Portfolios
The S&P 500 has had a tremendous melt-up in the fourth quarter of 2019. With the Federal Reserve’s cutting rates for the third time in October and the easing of trade tensions between the US and China, it is not surprising that the S&P 500 is up about 9% since September, making the fourth quarter one of the best periods of performance since the financial crisis.
Our Market Volatility and Leveraged Market Volatility Portfolios entered this quarter with a fully invested position. As the market kept making new highs, our rolling target was rising simultaneously. The market price reached our target in mid-November, which took us out of our invested position and moved both portfolios into our current cash-holding period. The exit was not necessarily a bearish call on the market; instead, we buy and sell according to our quantitative analysis. In the meantime, our cash-holding period earns short-term money market interest rates.
Our newly launched Sector Alpha Portfolio started the fourth quarter by equal-weighting the top three offensive sectors ranked by our proprietary model: technology, industrials, and consumer discretionary. Sector Alpha switched to the top three defensive sectors when the Market Volatility/Leveraged Market Volatility Portfolios had an exit. Currently, Sector Alpha is on defense with equal-weight utilities, consumer staples, and real estate sectors.
Upon the next buy signal, the Market Volatility and Leveraged Market Volatility Portfolios will enter the market, while Sector Alpha will rotate to offensive sectors.
If you would like further information about any of the above strategies, please feel free to reach out to me.
Leo Chen, Ph.D.
Portfolio Manager & Quantitative Strategist
Email | Bio
In addition to Leo’s commentary here, it’s that time of year when the rest of the Team at Cumberland Advisors provide their Q4 Reviews.
We may discuss what we favor, cash positions, warning signs, and what we see as opportunities. Read more Q4 Reviews to learn about the thinking behind our positioning of portfolios and how we execute strategies at this link: https://www.cumber.com/2019-q4-reviews/
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