November 2016 will go down as one of the most bizarre capital markets months ever. In the wake of a real live "Dewey Beats Truman" in US election results, almost every major defensive position was crushed by speculation on the economic plans of a Trump administration. Long-duration bonds, interest-rate-sensitive equities, and gold were hit hardest, and in the midst of the carnage a massive dollar rally put fuel to the pyre. But there are and were contradictions everywhere—a prime example is that the velocity of the dollar rally was similar to "crisis" events where the currency is being used as a "safe haven." High yield credit, which tends to move in correlation with equities, was overwhelmed by its interest rate sensitivity and was thrown out with the rest of the bonds in the bathwater. Finally, it's incredible to assume market participants can know how a Trump economy would play out—as if the most radical changes in government policy in decades can be known and discounted before they are even made clear, let alone pursued. We made our tactical and “look-ahead to 2017” moves at the beginning of this month and have recovered a great deal of the carnage-related performance.
We are a tactical allocation firm which utilizes fundamental research, a monthly portfolio review process and is focused on risk management. Our outperformance over our tactical allocation peers over the last five years is due in large part to this careful and crafted process focused on fundamental facts that monthly and longer datasets tell us about the direction of asset prices.
One month does not make a trend, but there are some useful signposts. We will be pointing the way in our tactical allocation portfolios, as you have come to expect over the last decade.
John Forlines, III
Past performance is no guarantee of future results. The material contained herein as well as any attachments is not an offer or solicitation for the purchase or sale of any financial instrument. It is presented only to provide information on investment strategies, opportunities and, on occasion, summary reviews on various portfolio performances. Returns can vary dramatically in separately managed accounts as such factors as point of entry, style range and varying execution costs at different broker/dealers can play a role. The material contains the current opinions of the author, which are subject to change without notice. Statements concerning financial market trends are based on current market conditions, which will fluctuate. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Forecasts are inherently limited and should not be relied upon as an indicator of future results. There is no guarantee that these investment strategies will work under all market conditions, and each advisor should evaluate their ability to invest client funds for the long-term, especially during periods of downturn in the market.
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