Ubique | June 2020 Update
June saw us make an absolute clanger of a mistake as we looked to optimise our Sell in May strategy. With the issue of liquidity for our Bond play, we went down the rabbit hole of looking at a replacement basket of instruments for the summer months. This ended up being the likes of Amazon, Microsoft, Apple, Google etc. A more indepth look at this was discuss in episode 10 of the Podcast. However, the survivorship bias inbuilt in the premise was ridiculous. Just goes to show, that even when you know what mistakes to avoid you can still make them. Thankfully, part of our process stopped this. That being the method of testing first before committing. Through the back/forward testing applied to it, we knew something had to be up with it, as it was showing an average of 60% annual return over a 2 decades of testing...
Its all for nought though now, as we have now been able to do something rather clever, and revert it back to what it was initially meant to do. Previously, this strategy was 4 times leveraged. Through looking at where the majority of the gains were being made and the money management approach being applied, we have been able to reduce it down to 0 times leverage, whilst keeping returns within 5% per year to what they were and reduce the drawdown a tad. This is because we found that the majority of the money being made across the four different instruments were clumped to the S&P500 and the 20yr+ Bonds. By simply using a x2 ETF of each, this would keep the drawdown lower than having all 4 markets and bond type positions open and deliver close to the same return on investment.
Looking at the rest of the portfolio, gold continued to rally, getting close to the Golden Cross of the 50/200MA. June netted 5.86% for the portfolio on our Golden Ratio strategy. The Seasonal Sector Rotation strategy saw us shorting Industrials, which proved to be the right play, putting 2.91% on the board. These, combined with 1.93% of the Sell in May revised strategy, put us up by 3.57% on the month, and 2.72% on the year. Compared to the SPY as the main tracker of performance, we are now pushing 3% above this benchmark, with it sitting at -0.07% for the year.
August we will be going live, with the final round of these pre-tests happening in July. Naturally, if we are able to make any of the strategies more robust, we will reflect those changes in the historical test return data.
Looking into July, we continue to hold our gold and long term bond position, as well going long financials.
For more in depth analysis, everything is on the website for inspection (www.willowoakadvisory.com).
Until next time, stay safe and swing easy.