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Update on the performance of the Seasonal Advantage Portfolio



Treacherous markets through the fourth quarter has a number of portfolio managers looking at deeply negative results for 2018.  While the Seasonal Advantage Portfolio was not unscathed by this period of abnormal volatility, we did fare significantly better than most.  From inception of the model on May 1st through the last day of the year, the portfolio was essentially flat (-0.40%), including fees.  Compare this to the 5.33% decline in the S&P 500 Index or the 8.23% decline in the TSX Composite, the alpha generated by our strategy is obvious.  The negative market performance during the historically strong fourth quarter of the year was undesired, but it was able to highlight the advantages of our new mandate, including the use of technical, fundamental, and seasonal analysis.  Given that the mandate is not handcuffed by dates alone, such as what our former seasonal fund (TSE:HAC) suffers from, we were able to outperform our predecessor by over 300 basis points thanks to healthy cash positions held in October and December.

The broader equity market remains in a period of seasonal strength through the start of May, but while the calendar suggests the market should perform one way, the technicals are suggesting an alternate path.  The damage created amongst the charts could take some time to rectify, potentially causing prices to counteract those historically positive tendencies through the months ahead.  In the Seasonal Advantage Portfolio, we seek opportunities in seasonally favoured positions throughout the year, but if the three prongs to our strategy fail to align, protective measures will be executed.

We are excited about the opportunities that this new volatile trading environment has brought us.  It is in this type of market that our active three pronged approach really flourishes.  Not only can we allocate to areas of the equity market or asset classes that are outperforming the broad market return, but we can also take advantage of extremes in prices that create stretched conditions equivalent to that seen on Christmas Eve.  If enacted correctly, alpha can be generated fairly quickly while mitigating the negative impact of the herd mentality that is running rampant in the market.

If you have any specific questions regarding the portfolio or are ready to gain exposure to the strategy that we’ve worked so hard on, please email me at seasonalportfolio@equityclock.com.

 

*Benchmark is an equal weight of the S&P 500 Index, TSX Composite, and Intermediate US Treasury Bond (as tracked by IEF)

 

Sponsored By...
Seasonal Advantage Portfolio by CastleMoore

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