Liquid Strategies Insights & Commentary

Is this the most hated rally ever?

Author: Shawn Gibson

 

In my role, the first thing everyone wants to talk about is my opinion on the markets (and ideally exactly what to buy and sell and when!). These advice seekers usually walk away empty handed in terms of specific investment ideas, but I am always happy to talk big picture in terms of broad risks and opportunities. The only question that I have gotten over the past few weeks is some version of: “Why is there such a big disconnect between the stock market and the economy…shouldn’t the market be much lower?”

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Topics: Overlay, Volatility

How a Potential Vaccine Affects the Market

Author: Megan Delaney

 

If there’s one thing we can all agree on in the age of coronavirus, it’s that we cannot stay shut down forever. Sooner or later we will have to reopen, and many states have already started that process with mixed results. People want to feel safe as they come out of isolation and venture back into the world, and even with social distancing, masks and testing, many of us will not truly feel safe until a vaccine is developed.

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Topics: Overlay, Volatility

A Little Goes a Long Way

Author: Justin Boller

 

It’s been over a decade since I last grilled using charcoal. This past weekend I found a half-used bag of Kingsford and decided to give it a try. This particular brand of Kingsford was “Match Light” which should catch instantly to get the coals burning.

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Topics: Overlay, Volatility

Get Outside

Author: Adam Stewart

 

If there’s one thing that being stuck inside proves, it’s that getting outside has never been more important. Being outside and experiencing your natural surroundings is critical for both mental and physical health.

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Topics: Overlay, Volatility

Volatility Outlook for the Remainder of the Year

Author: Shawn Gibson

 

After multiple daily moves over 9% in the S%P 500 Index in March (including one down day of almost 12%), market volatility has contracted significantly since the March 23rd bottom. One way to measure volatility is to look at the average daily moves of the market (regardless of direction) to quantify the daily price swings. In March, the average daily move of the S&P 500 Index was 4.95% (it moved up or down on average 4.95% a day).

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Topics: Overlay, Volatility

Find the Time – Asset Allocation Strategies To Manage Volatile Markets

Author: Justin Boller

 

Since 1976, there have been 3 periods where a balanced portfolio (60% stocks / 40% bonds) have experienced drawdowns of greater than 10% - after the 1987 crash, the recession in the early 2000’s and the financial crisis in 2007-2008. While each of these are unique in their own way, they do have one thing in common, we recovered.

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Topics: Overlay

Active vs. Passive Management

Author: Brad Ball

 

The battle has raged for years…a quick internet search will yield mounds of data arguing when active will or will not outperform. It seems the opinions so often reflect the vantage point of the author.  The old expression by Mark Twain seems to hold true “Figures don’t Lie, But Liars Figure”. Here we are again, right in the middle of a major selloff when “Active Management” is supposed to outperform so…how have active managers performed?

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Topics: Overlay, ETF

Manager Commentary - Q1 2020

Author: Shawn Gibson

 

While there is much to discuss from a markets perspective, first and foremost we hope you and all of your loved ones are safe and healthy. In previous letters, we laid out a number of potential catalysts for ending the historic bull market and starting a global recession, including the possibility for events that at the time no one could anticipate. COVID-19 turned out to be that great unknown, sending shockwaves throughout the financial system as investors attempted to find the “right” discount to apply to risk assets given the high level of uncertainty for the economy, earnings and even solvency for many companies and industries. The end result was one of the most violent equity market declines in U.S. history, with the S&P 500 Index losing over 35% in just the course of a few weeks, bringing with it historic levels of market volatility. Despite such extreme market conditions, the Overlay Strategy (utilized as an income generation tool within our six main strategies), actually generated a positive 0.37% return for March with the S&P 500 Index -12.35%, and -1.99% YTD compared to -19.60% for the S&P 500 Index. The Strategy continues to demonstrate the ability to generate positive long-term incremental income to underlying beta sources while protecting capital during times of market stress. For investors that would have been invested in these various strategies since the inception of the firm, below are the illustrative long-term performance results:

*Hypothetical/Illustrative performance is not an indicator of future actual results. The results reflect performance of a strategy not offered to investors during the time indicated in the analysis  and do not represent returns that any investor actually attained. Hypothetical/Illustrative results are calculated by the retroactive application of the Overlay strategy constructed on the basis of historical data combined with other existing independently-managed ETFs and based on assumptions integral to this presentation which may or may not be testable and are subject to losses. General assumptions include: The manager would have been able to purchase securities in a single portfolio with similar characteristics to the Overlay Strategy and the Index ETFs recommended by the illustration, and the markets were sufficiently liquid to permit all trading. Indexes used for comparative purposes cannot be traded, however there are securities, funds, and similar investments that can be purchased to obtain similar results and include no fees. Changes in these assumptions may have a material impact on the hypothetical returns presented. No representations and warranties are made as to the reasonableness of the assumptions. This information is provided for illustrative purposes only. Actual performance may differ significantly from hypothetical/illustrative performance. Source: Morningstar, Bloomberg, L.P., Liquid Strategies.

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Topics: Overlay, ETF

ETF’s – Part of the Solution or Part of the Problem?

Author: Justin Boller

 

With all areas of the market in turmoil, there has been extra scrutiny placed on ETFs and their role in the financial markets. ETFs have seen exponential growth over the past decade, as investors have gravitated towards typically lower costs, tax advantages, and intra-day trading capabilities. With this meteoric rise, investors who are not familiar with this structure can get spooked and fear a bubble building in the market.

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Topics: Overlay, ETF

Market Bottoming Process

Author: Shawn Gibson

 

Given the high level of uncertainty regarding COVID-19, it is impossible to estimate what the final market bottom will be. The final low water mark will be a function of a number of factors, including, but not limited to:

1) The availability of widespread rapid testing

2) The development of treatments for patients having an adverse reaction to the virus

3) The timing of businesses reopening to once again allow consumer spending

4) The magnitude of financial and fiscal stimulus to provide relief to our citizens and businesses that are struggling during this shutdown

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Topics: Overlay

Liquid Strategies Blog

This is where our team takes the opportunity to discuss Market Observations, as well as Portfolio Manager Commentary.

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