The retreat of the safe heavens
September proved to be a mean reverting month for Treasuries and Gold. Following last month’s +11% and+8% moves respectively, Treasuries corrected by -2.6% while Gold retreated -3.3%. Although the S&P500 returned a healthy 1.95% and is flirting with all time highs, the market has become increasingly volatile and expectations for equities are mixed.
The VIX index currently sits at 16 while longer dated VIX futures are closer to the 19 level. These above average VIX levels points to uncertainty among traders as higher ‘insurance premium’ is paid for buying protective put options. The market is still nervous about the continuing China/U.S. tariff standoff, Brexit developments and possible complications in U.S.-Iran relations as unidentified drones struck two key Saudi oil installations. In the U.S., political developments around the Trump impeachment also had a temporary market-negative effect.
On a market-positive note the FED seems willing and committed to keep the market afloat by lowering rates. Some FED members do seem worried about pushing rates much lower which could shift expectation in the future.
Most of our strategies have been in defensive mode, with substantial allocations to treasuries and/or gold. This was a correction month where our best performers, namely the 3X Universal Investment Strategy (UISx3) and the Maximum Yield Rotation Strategy (MYRS) had large corrections of -6%. Despite the pullback they both have year-to-date returns well above 30%. Our free ‘all-arounder’,the Enhanced Permanent Portfolio lost -0.9% for the month.