Risk-On Rolls On

Another week, another risk-on rally. US stocks continued to be a leader this week in global markets. SPDR S&P 500 (SPY) surged 3.3% at the close of the trading week (Aug. 28), marking the fund’s fifth straight weekly advance. Bonds, however, hit a rough patch. Vanguard Total US Bond Market (BND) fell 0.6% this week – the second weekly loss in the past three.

The weakness in fixed-income didn’t pinch our portfolio benchmarks, at least not much. The US stock/bond 60/40 strategy, for instance, added 1.6% this week and for the year to date it is ahead by more than 8%. (For definitions of all the portfolios and risk metrics referenced in this article see this summary.)

Two of our proprietary strategies continue to deliver strong results, while a third continues to meander. The winners: Global Managed Volatility (G.B16.MVOL) and Global Managed Drawdown (G.B16.MDD) each posted a 1.9% return this week. The trio’s laggard (still): Global Minimum Volatility (G.B16.MINV), which ticked down 0.1%.

Sell signals continue for two funds in G.B16.MDD: iShares 7-10 Year Treasury Bond (IEF) and iShares iBoxx $ Investment Grade Corporate Bond (LQD). Both funds have been sells for three weeks as of today’s update. That’s been a good call, at least so far -- both funds continue to lose ground and posted losses this week and are moderately below the original sell-signal prices. A third fund, by contrast, shifted back to risk-on after going risk-off previously for G.B16.MDD: as of today’s close, iShares Latin America 40 (ILF) shifted back to a risk-on position.

G.B16.MVOL, by contrast, continues to remain risk-on across the board, as it’s been since early April.

Here’s how the three proprietary strategies compare against the benchmark – Global Market Index (GMI) since 2014. Note that sidestepping a fair amount of the losses from the coronavirus crash was unusually valuable this year in minting positive performance.

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Disclosure: None.

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