Momentum is one of the persistent factors at work (our Momentum Portfolio is designed to extract this very factor) - but does it always work? Fig 1 below shows how Momentum has really led since middle east hostilities eased in early April this year. And this holds true over longer time periods too, especially in bullish market conditions. Growth is the other factor that comes close, perhaps steadier. Together these constitute the bedrock of factor investing…at most times.
While Gold is not a “factor” in the classic sense, we compare factors to alternatives - Gold (as a currency diversifier) and Managed Futures (as a portfolio diversifier). Incorporating these in a traditional factor analysis will provide a broader market regime picture - so what is this telling us now? Fig 2 below shows the substantial outperformance in Gold since early August - a reflection of a market’s somewhat dour mood in recent weeks (SMH is broadly flat and lacks momentum).
Our recent note (Debt Doesn’t Diet on Debt) flagged relevance of Gold as Dollar debasement narratives gain currency. We continue to see Gold not just as a regime diversifier, but also as the best placed Dollar diversifier.
How to Play Factors?
Momentum Strategy - Our proprietary, discretionary strategy isolates Momentum in a risk-managed, daily liquid strategy.
Dynamic Index - Fundamental, global, unconstrained strategy is designed for compounding exposure to growth and quality equities, in a daily liquid format.
Systematic Global Equities - Exposure to Global Equities through ETFs, leveraging momentum as well as our proprietary thematic overlay, opportunistically, a weekly liquid format.
Factor Dashboards - We run daily tracking of factors (discussed in this note) - Ask for Details.
Fig 1 - Momentum and Growth Are Sustainable Leaders
Fig 2 - …BUT, there are times when risk diversifiers lead…
