2016 Tactical Model Wrap-Up

As we enter the final month of 2016 we have much to be thankful for.  Far too often we measure our success or happiness by our financial success, and I am just as guilty as everyone else.  For quite some time, investors have been emotionally preparing for a significant drop in the stock market yet one has not materialized.

Even though we have not experienced a significant drop, we have indeed seen a return of volatility.  Since the election in November we have seen a rotation in investment dollars from bonds to equities.  Rates on long-term bonds have risen very quickly with bond holders taking it on the chin.  Even in equities we have seen specific sectors outperform other sectors.  In November, our tactical models were invested in Financials (up 15.43% in November), Energy (up 6.93% in November), and Technology (down 2.87% in November). 

Heading into December the Sector Momentum will maintain its position in Financials, and has also rotated from Energy and Technology into Industrials, Basic Materials and Consumer Discretionary.

All models are currently fully invested and in bull status.  Below is the performance for each model for the month of November:

RISK MANAGED CAPITAL APPRECIATION:  1.79%

DISCIPLINED BALANCED GROWTH:  3.30%

TACTICAL AGGRESSIVE GROWTH:  5.70%

While November has certainly been great for our models, the best development is the return of trends.  For much of 2016, the market has moved sideways.  Tactical models perform best when a clear trend can be identified and followed.  When the market makes quick movements up and down, then no clear trend is established and tactical models will lag.  We are hopeful that these trends can continue and our models can continue to perform well.

Eventually we will see a drop in the market even though that may now happen much later than initially anticipated.  The best part is we don’t have to guess when this will happen.  If the market does start to deteriorate, then the various algorithms in the tactical models will make defensive moves on their own.

Notes and Disclaimers

Technical Analysis Risk – A significant risk of using market timing strategies based on technical analysis is that our analysis may not accurately detect anomalies or predict future price movements. Day-to-day changes in market prices of securities may follow random patterns and may not be predictable with any reliable degree of accuracy.

Short-Term Purchases – The success of a short-term purchase strategy would be affected by whether we can predict how financial markets will perform in the short-term, which may be very difficult and will incur a disproportionately higher amount of transaction costs compared to long-term trading. There are many factors that can affect financial market performance in the short-term (such as short-term interest rate changes, cyclical earnings announcements, etc.), but may have a smaller impact over longer periods of times.

Our strategies and investments may have unique and significant tax implications. However, tax efficiency is not our primary consideration in these tactical models. Regardless of your account size or any other factors, we strongly recommend that you consult with a tax professional prior to and throughout the investing of your assets.

Investing in securities involves risk of loss of which you should be aware. We do not represent or guarantee that our services or methods of analysis can or will predict future results, successfully identify market highs or lows, or insulate you from losses due to market corrections or declines. We cannot offer any guarantees or promises that your financial goals and objectives will be met. Past performance is in no way an indication of future performance.

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