Jul 16, 2014 | Post by: Roman Chuyan, CFA Comments Off on 1H-2014: Consistent Risk-On Not Influenced by Geopolitics –

1H-2014: Consistent Risk-On Not Influenced by Geopolitics –

The first half of 2014 was characterized by a conflict between strong fundamentals and perceived risks. Many observers were puzzled by the equity market’s continued strength, and predicted negative outcomes this year. However, fundamental economic data that our tactical asset allocation model has determined to be important for equities, have been strong this year. The model’s return forecasts for U.S. equities generally stayed in a 6%-8% range; accordingly, we kept all our tactical strategies in risk-on stance.

  • As our model dictated, all of our tactical investment strategies were consistently in risk-on position throughout 1H-2014, and were not whipsawed by market volatility.
  • The Complete Market and 2xStocks-Bonds strategies delivered above-10% YTD returns, outperforming their benchmarks by over 3.4%. The Stocks-Bonds strategy returned 6.3% YTD.

The Complete Market strategy (our most popular) benefitted from its Growth exposure early in the year, and our rebalancing from Growth into Value in mid-March based on our model’s forecasts helped us achieve a 10.1% return in this portfolio. Positioning our growth 2xStocks-Bonds strategy for the upside based on our model’s return forecasts (that turned out to be quite accurate) helped us achieve 10.3% YTD return in this portfolio.

Tactical investment performance 1H-2014

Please see the ModelCapital Tactical Investment Performance Jun-2014 report for more details.


About Model Capital Management LLC: we are an investment firm located in Boston, focusing exclusively on tactical management. Please review the following pages for more information on Model Capital’s unique approach to tactical management and tactical asset allocation models/strategies.

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