Strategy & Portfolio Updates as of 2024-08-02

This week's update follows a slightly different format than usual. We anticipate returning to our standard email format next week.

Market conditions have been turbulent since mid-July, with significant declines observed across various sectors. Many market favorites have experienced drops of 30-40%, while the semiconductor sector as a whole has declined by approximately 22%. The Nasdaq has also seen a substantial decrease, falling by 10%.

Despite this volatility, our low volatility strategy is now matching the Nasdaq's performance since its inception, albeit with significantly lower volatility. For the week ending August 2, 2024, our strategy showed resilience, declining by 1.24%. In comparison, the S&P 500 fell by 2.06%, and the Nasdaq experienced a more substantial drop of 3.29%.

A notable development in our strategies has been the recent addition of TLT, providing exposure to long-term bonds. This addition coincided with a shift in the relationship between bonds and equities. For the past few years, bonds and equities have not effectively diversified each other in traditional 60/40 portfolios. However, bonds have recently begun to demonstrate an inverse correlation with equities once again, potentially offering improved diversification benefits. It remains to be seen whether this renewed inverse correlation will persist.

As of this report, all three of our strategies remain in a risk-off mode, reflecting a cautious approach to current market conditions.

Here are some graphs highlighting points that are particularly interesting. I've chosen to make the following graphs break our normal formatting so they are easier to see. The following graph shows our medium volatility strategy vs the Nasdaq's volatility. You can see a sharp uptick in volatility most recently for the Nasdaq(Red), but notice the strategy, in green, has stayed relatively flat. This is a rolling six month average of volatility so such a sharp uptick indicates dramatically higher volatility.

This next graph shows monthly returns of the medium volatility strategy vs the Nasdaq. The important take away from this is that these strategies strive never to lose very much money but when conditions are right will generate higher returns.

Positions and weights can be seen here. https://www.originedge.net/tlt-position-update-2024-08-01/