Our model portfolio had a very healthy 3.7% gain in November and reached a new all time high. This is better than the 3.1% return for S&P 500 index. Our YTD return is 27%, beating the 7.2% return of S&P 500 index by almost 20% (Table 1).
We had two trades in the month. We exited the XIV position on October 31 before the presidential election and bought it back on November 10. This trade turned out to be approximately neutral for our portfolio performance. We avoided the pre election volatility but also missed the initial phase of the post election precipitous decline of VIX. After re-entry, our XIV position had returned ~10% through December 2. This round trip move yet again proved the validity of our trend following strategies. We did not predict (aka gamble). Instead, we reacted and stepped out the way when there was storm ahead and jumped right back in when the clouds were lifted.
There was no trade for our core dynamic allocation strategy because it is a longer term strategy and the moderate volatility around presidential election was not enough to trigger a sell signal. Nevertheless, the performance of this portfolio was affected by the outcome of the election. One of stunning phenomenons post Trump victory is the divergence of value and growth stocks. Value stocks outperformed growth stocks by almost 7% (for people in doubt, check out Amazon vs Bank of America), the widest margin in a decade (Figure 1). Our strategy, "unfortunately", holds ⅔ in RPG, a pure growth ETF and ⅓ in PRF, a pure value ETF and consequently was slightly affected by the divergence of value and growth stocks.
At the end of November, we are fully invested for both VIX and core dynamic allocation strategies.
Table 1. YTD monthly and cumulative returns of our model portfolio and S&P500 index
Figure 1. November returns of value ETF, PRF (PowerShares FTSE RAFI US 1000 ETF), value ETF, RPG (Guggenheim S&P 500 Pure Growth ETF) and S&P 500 index (source Yahoo Finance).
Disclosure: I am/we are long XIV, RPG, PRF, SPXL.