Without any meaningful signs of stopping, the S&P 500 has sold off 8.3% since 1/4/22 and closed just below the 200 day simple moving average.
It’s rare that the market pushes that hard for that long, yet even now the mean reversion strategies have room to buy a few more stocks if the market offers another push down.
On the other hand – if we do get a pause and a relief rally, the portfolios are well positioned to take advantage of the upward move and will sell out their long positions on the way up!
How have the portfolios done on the way down? Unaudited Results are as follows:
SPY: -8.3%
High Sharpe -4.1%
Quantum Return -6.9%
So far, being is diversified strategies is protecting capital on the way down – showing outperformance relative to the market on the downside.
With respect to the longer term positions – if the market doesn’t recover enough by the end of the month, the portfolios will likely be reducing to half their long term equity positions. We shall see – but this is a prime advantage of trading algorithmically. We know when to get out – and just as important when to get back in.
If we do enter a bear market regime, we can expect both portfolios to seriously outperform the overall market by acting to preserve capital.
We shall see where the market goes from here. I won’t make market predictions – what I will do is follow the strategy rules we have in place for handling what the market does, whatever that may be.