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. Access the full report with a Market Signals or All-in-One subscription.
Contents
1. Performance of the Ensemble and Benchmarks
2. Recap and Market Outlook
3. Positions and Performance of Strategies
4. Signal Summary for Next Week
1. Performance of the ensemble and benchmarks
Weekly return of the ensemble: +1.2%
This week, the equity of the equally weighted strategy ensemble gained 1.2% to new highs for the year.
Year-to-date performance (Backtest, no leverage)
| YTD Return | YTD Maximum Drawdown | Weekly Change | |
| Strategy ensemble | +15.1% | -2.5% | +1.2% |
| Invesco RSP ETF | +19.0% | -5.6% | +2.57% |
| SPDR SPY ETF | +26.5% | -5.4% | -1.7% |
On a risk-adjusted basis, the ensemble outperforms both the SPY ETF and its equal-weight counterpart, the RSP ETF.
2. Recap and market outlook (November 19–November 22, 2024)
All assets had gains this week. Stocks (SPY), bonds (TLT), commodities (DBC), and the US dollar (UUP) gained 1.7%, 0.3%, 3.4%, and 0.8%, respectively. The strategy ensemble ended the week with a gain of 1.2% after a strong rebound in Dow-30 mean-reversion (MRDOWW), which was up 2.8% for the week and 28.4% for the year. Asset (ETFNRW) and sector (DMSRM) cross-sectional momentum also had strong gains of 2.7% and 2.2%, respectively.
With a loss of 1.8% for the week, the Dow-30 long-short (DOWWN) strategy continued to hinder performance, but this behavior is typical of strong market rebounds. We deliberately included this strategy in the ensemble because it provides positive convexity during market crash periods. Two weeks ago, we wrote:
Although it may seem counterintuitive, a long-short strategy, due to its low beta with the market, smooths returns. For example, during fast crashes, the long-short strategy usually outperforms and may provide a solid hedge, which helps limit drawdowns and equity volatility.
The stock market has entered a state of high uncertainty due to a fluid macroeconomic landscape and a new geopolitical regime marked by unprecedented bluffing and gambling. The impact of this new environment on capital markets remains uncertain, and market participants’ wishful thinking could fuel short-term reactions, which may not serve as reliable indicators. After many years of a positive outlook for equity markets, we are switching to a moderately bearish outlook. We believe that excessive optimism is due to cognitive biases rather than sound analysis. We rely on strategies to deal with the new market environment and regime rather than on narratives.
3. Positions and strategy performance: Friday, November 22, 2024
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Charting and backtesting program: Amibroker. Data provider: Norgate Data
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