3Q 2019 Performance
Dear Investor,
Our Tactical Asset Allocation strategies (as of 09/30/2019), relative to the S&P 500, MSCI ACWI, have continued to underperform these equity benchmarks. Our typical 2019 YTD returns are in the +10% range for our GTAA as well as USTAA strategies, while the S&P 500 has returned in excess of +20%. While we are playing catch up with the equity markets, valuations and asset pricing have continued to climb higher, and we remain cautious in our allocations.
As of this writing, our proprietary models indicate that the probability of a bear market remains at about 5%. However, we remain conservative in our portfolio allocations in conservative sectors such as staples, healthcare, utilities and real estate. Only 15% of the portfolio is technology and communications today, with little exposure to consumer discretionary, Europe or Emerging Markets.
We are keeping a close eye on the breaking economic news out of Brexit and the ongoing US-China trade war. The shift in our allocations in the coming days may be more towards non-US equity markets (Europe and Emerging markets in our GTAA strategies) and away from gold and bonds. Within the US portfolio, a shift towards industrials and materials may benefit. We believe that global macro-economic data remains somewhat muddled and we remain on the sidelines on some of these asset classes until there is some more clarity on the Fed decision, Brexit and the trade war.
As always, thanks for your trust and staying invested with us!
Best regards,
Sri Nagarajan
Managing Partner