January 2020 Commentary

Led by Alpha Seeker, TCM strategies performed well in a challenging month for equity indexes as the “coronavirus” outbreak in China dented expectations for global growth. After sleepwalking higher since October, risk assets suddenly began melting as news of quarantines and a shutdown of a large portion of the Chinese economy spread in the back half of January.

Jan 2020 Return Comp.PNG

This is so far just a bump in the road for equities, but is yet another microcosm of how TCM strategies can help improve portfolios. At the start of the year there was no “market outlook” that flagged a Chinese pandemic as a risk for equities, and it was certainly not on our radar. Only by systematically assessing changes in the VIX marketplace were TCM strategies able to quickly adapt to the changing landscape and provide an offset to struggling passive strategies.

The ability of this process to adapt quickly and without relying on predictions is what sets it apart. The value it creates is in line with the duration of each new environment, bearish or bullish. So while this episode may so far be mild, it serves as a reminder of the need for investors to be prepared for anything.