Logical Invest Investment Outlook - July 2016

No wonder that most our strategies had a good June return:

The two BUG strategies, being exposed to both TLT and GLD benefited, returning +4.98% and +7.4% for the month. Our World Top 4, despite its exposure to foreign markets did +6.50%, mainly due to the treasury hedge. The most interesting play was our fairly new Gold-USD strategy: It returned +4.6% benefiting from two side-effects of the Brexit vote. The strategy was long Gold and short the Euro (using an inverse ETF): Gold rose as it provided a safe heaven to panicked GBP-based investors while the Euro fell as the market priced in a possibility of a deepening E.U. crisis.

Another point to examine is how monthly (or bi-monthly for MYRS) rebalancing helps our UIS 3x and MYRS strategies do well through large market swings . Even though both strategies held fairly steady allocations for the past few months, they do need rebalancing and effectively sell positions into strength and buy positions into weakness. An example: UIS 3x was allocated 50/50 to SPXL and TMF, the 3x versions of SPY and TLT. As TMF rose significantly for June, the value of the TMF component rose beyond 50% while SPXL share fell below 50%. So assuming a new 50/50 allocation, one would have to sell part of TMF (for profit) and buy some (weaker) SPXL. 

Although the markets seem to be back to normal, make no mistake: Britain’s exit is a historical decision with many long term political, social and economic consequences. But in terms of our investments it seems to have a positive effect as world central banks further delay rate hikes and pledge increasing support to the markets.

We remain close to last month’s assessment: We expect a somewhat volatile summer while we wait for a very interesting pre-election fall. For now, we still favour our more conservative strategies like UIS, the BUGsGSRLV and BRS.

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