· October saw continued volatility in the equity markets. The month leading up to the US Presidential elections looked as if global indexes might recover from September and approach previous All time highs, but retreated ending the month mostly flat. This mid month retread in the equity market can most simply be explained by the uncertainty surrounding the election as well as COVID-19 cases continuing to raise. All this also lead US fund flows to move out of equities towards the safety of bonds.
· Even with Septembers sell off and October remaining mostly flat, Tech is still having a remarkable 2020, with the NASDAQ up over 22% YTD. However, there is a different story to be told for the DOW Industrial Index and US small cap Companies, represented by the Russell 2000 index, both down nearly 6% at the end of October. This continues to show a stark picture between the economy at-large, compared to “big tech” and which sectors were hurt by the pandemic.
What we did:
· Proxy managed equity-oriented clients, by holding steady in our allocation over the month with no changes to our Core Equity model. We maintained our model exospore to US equities utilizing IVV and QQQ, but have also kept some fixed income exposure via BND. The algorithm predicted little change through out the month and was spot on.
· The Proxy Core Growth model held up well in the recently volatility, which offered the opportunity to add a few new positions. The strategy, while still heavy in high growth tech, did largely benefit from a few select names in the healthcare and consumer cycle sectors.
What we are watching:
· The US elections seems to be the sole focus both domestically and globally. With this very heated election coming to an end as the polls close November 6th, we wait to see if Dem. Joe Biden can hold his lead in the polls or in President Trump we remain on for another 4 years. With such a close race and President Trump already vocalizing concerns over voter fraud via mail in ballets, there is a chance this may drag on for months to come. Such a situation could be have a significant drag on economic recovery and the release of addition COVID relief funds.
· We continue to closely monitor advances in COVID-19 vaccinations, as the winter months approach and cases continue to raise.
· We remain poised to react quickly if the market does in fact correct again, while remaining consistent with our algorithmic approach in our Core models.
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