Anyone who has followed the markets for even a handful of years knows that the month of September is on average the worst performing month of the year. September 2020 is starting off to be no different. Beyond the crazy high multiples of big tech and the overall equity markets, the volatility (or fear) index (VIX), which typically remains low during more placid (and GDP-correlated) upward moves in the markets, has been running up in tandem with stocks ahead of this recent selloff. Furthermore, a recent CNN Business article pointed out that the VIX relative to new S&P 500 highs are at levels comparable to the tech bubble:
With historically bad vibes in September combined with the upcoming elections, investors may want to fasten their seatbelts (and take some profits). It will likely be a bumpy ride.
Forte Strategy Update
We executed 11 trades last week for a net gain of 2.0% compared to a loss of 2.3% by the S&P 500. Our YTD net results equal a 4.5% gain compared to a 6.1% YTD gain for the S&P 500. Our YTD max drawdown is 9.5% versus 33.9% for the general market. Overall, we are pleased with the performance of the models leading up to and during the sell-off. The VIX ETF models triggered early and served as both a hedge to open long trades and profit generators as the market sold off. And, the sudden increase in volatility shut down the TQQQ ETF to help avoid losing whipsaw trades. The net profits for the week came from both the long market trades and the VIX hedging trades – as planned and hoped. The math models ended the week 100% in cash.
More details about our trading activity can be found by registering on the Collective2 website and searching for Forte Strategy. A running list of these email blogs and general information about Maestro Capital Research can be found at maestrocapitalresearch.com.