With the US Federal Reserve expected to raise interest rates this week and central banks in Japan, Switzerland and Britain also expected to announce their policy decisions, we take this opportunity to pause and draw your attention to a few market observations.
US equity markets are near all-time highs, the yield on a 10-year US Treasury note has dropped to 2.2% and the VIX Index remains historically low despite the myriad uncertainties which global markets face. These market behaviours have made broadly diversified global asset allocation strategies perform well in the last few months. Our flagship MASTR strategy, designed to be maximally diversified across all of its constituents, has had 6 months of back-to-back positive returns, a trend that has not been observed since 2010 - which for the record, had 10 months of back-to-back positive returns per below.
This means that global markets, when viewed through the prism of systematic multi-asset investing, have had a longer positive run than usual. It is unlikely that the next 6 months prove to be so benign. As a result, we think it wise to stick to disciplined investing, focused on highly liquid assets with periodic rebalancing, based on sound logic such as minimising risk or maximising diversification. This is what a growing number of our clients use ALPIMA for, using their preferred products as constituents, tuning their models to their needs and adjusting them with their own market views.
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Monthly returns of ALPIMA MASTR strategy since November 2006