Market recap, open positions, new signals, and performance of six trading strategies. Tactical asset allocation, mean reversion, cross-sectional momentum, and equity long-short with weekly and monthly updating. New equity highs. Access the full report with a Market Signals or All-in-One subscription.
Contents
1. Performance of the Ensemble and Benchmarks
2. Market Recap and Comments
3. Positions and Performance of Strategies
4. Signal Summary for Next Week
1. Performance of the ensemble and benchmarks
Weekly return of the ensemble: +1.1%
The equity of the equally-weighted strategy ensemble reached new highs this week.
Year-to-date performance (Backtests, no leverage)
| YTD Return | YTD Maximum Drawdown | |
| Strategy ensemble | +11.0% | -2.1% |
| Invesco RSP ETF | +7.7% | -6.0% |
| SPDR SPY ETF | +18.6% | -5.4% |
On a risk-adjusted basis, the ensemble outperforms both the SPY ETF and its equal-weight counterpart, the RSP ETF. The ensemble also outperforms the latter on an absolute return basis.
2. Market Recap and Comments (July 8–July 12, 2024)
All assets gained in the holiday-shortened week on the back of a falling US dollar index (UUP, -0.7%) and commodities (DBC, -2.1%) due to expectations of continuing disinflation after the CPI release. However, gold (GLD) was higher by 1%.
Large-cap stocks (SPY) added 1%, breadth improving significantly, and the equal-weighted S&P 500 index (RSP) rose 3% for the week. International stocks (VEU) were up 2.1%. Fixed-income markets rebounded, with the TLT ETF gaining 1.5%.
Large-cap (SPY) and international stocks (VEU), along with corporate bonds (HYG), are overbought.
We cannot be sure whether the disinflation will continue or whether the Fed will cut rates in September. More importantly, we are uncertain about the impact of any rate cuts on the equities and fixed income markets, given their potential to trigger inflation. The precious metals markets believe so, but geopolitics also adds to the uncertainty. All in all, we admit we know nothing about the future, as opposed to many analysts, especially on the macroeconomic side, who display a sense of confidence about their ability to predict the future. Many years of experience have taught us that markets are unpredictable, and short-term winning streaks resulting from lucky predictions can quickly turn into losing streaks. Therefore, we rely on strategies and hope they will be robust enough to minimize losses if markets become erratic. Experience has taught us that this is the best we can do, and that trying to be a market prophet is a dangerous game.
3. Positions and strategy performance: Friday, July 12, 2024
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Charting and backtesting program: Amibroker. Data provider: Norgate Data
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