The weekly Market Update is posted at Alpha Baskets and includes the following.
Barron’s reported that Morningstar is in the process of creating a style box for liquid alternatives (ETFs and traditional mutual funds that offer access to some sort of alternative strategy). The focus here will be correlation and volatility relative to equities. There were actually two different articles focusing on alternatives covering similar ground related to weak performance relative to equities, outflows broadly speaking and then attempted to explain proper expectations for liquid alternatives.
A good example continues to be found in gold. For years we have contended that one reason to own gold is its tendency to have a low to negative correlation to domestic equities. After a long run of relatively poor returns, many pundits suggested that owning gold no longer made sense. We argued that gold was doing exactly what it was supposed to do which is to not look like equities. As 2016 started, equities sold off and gold denominated in us dollars went up double digits in short order. Fast forward to the Trump rally where equities are up 5-15% depending on the index while gold is down a little over 10%. Great for anyone nimble enough to trade around these moves but small allocations to segments and strategies with a low to negative correlation is how portfolio volatility is managed.
Please click through to read the entire update.
Old Chevy pickup truck from the car and motorcycle show I stumbled into a couple of weeks ago in Los Angeles.
Park entrance in 29 Palms, CA
We had almost a foot of snow here on Christmas Eve.