Up just over three percent for the week. The strategy crossed back into positive territory for the year today.
In September coming out the the August pullback, I wrote:
If it [the market] does bottom, expect the strategy to under perform the S&P 500 for a few weeks. Historically it has always lagged a bit on the initial rebound. Remember, the unlevered portfolio only slightly beats the index over time (but with half the volatility and a quarter of the drawdown). It beat the index by 5% in August, so on the rebound expect to give some, but not all, back vs. the index.
Now I have no idea when the market is going to bottom. It could have bottomed last Monday, could be next week, next month or next year. What I do know is when it does bottom, the strategy will lag the market’s performance on the way out. It always has in backtests, and it always has in live trading. If Monday was the bottom, this week serves as a good example. The S&P 500 rose 10% and the strategy climbed 3%.
In August I said the under performance would last a couple weeks. Since this pullback is deeper, it should be longer, maybe a month. However the strategy is presently sitting on a 21% lead for the year. There is no reason to try and time the market bottom. It will roll back into an aggressive position when it’s safe to do so.
The portfolio barely changed this week. Slight move from gold to stocks. Cash levels remain the same. On March 27th, 2020, the strategy rebalanced to:
13% SPY , 19% TLT , 8% GLD , 60% Cash