Tuesday, February 7, 2017

Uncertainty Is High and Volatility Is Low: 
Yet Another Relationship Suffering From Changing Correlations


Our key theme for 2017 is that being "tactical" (with portfolio strategy) becomes even more important because normally reliable and long-held relationships between asset classes have been breaking down (and as a result adding greater risk to what was previously understood to have lower risk). 

We saw this beginning to happen in 2015 when we began High Rock Capital Management and as a result,  added a third dimension to the standard balanced portfolio of equity and fixed income with a model that features a more tactical approach. This is intended to be a vehicle that is non-correlated to the standard balance which helps to lower risk and increase 
risk-adjusted returns : more return for the amount of risk taken. 



This has allowed our clients to avoid the very volatile swings through 2015 and early 2016 and come out with a significantly better 2 year performance (to the end of 2016).

So far this year, volatility has remained at very low levels, while the uncertainty swirling around the global geo-political and economic fronts has been rising significantly.



Certainly the new US administration has made some robust promises that favour stock market fundamentals. However the rhetoric and the tweets coming from the President have focused on immigration and protectionism. 

Stock markets remain hopeful (and relatively expensive), but await detail and timing to justify their current levels and recent economic data has been mixed at best (inflation slowly ticking higher, employment and wage growth stalling, manufacturing index rising). 



So we wait, with growing levels of anxiety over what happens next and what priorities emanate from the White House.

Our strategy: be nimble,  (don't wait for the markets to go ballistic before you make adjustments to your strategy).

Be tactical.

Remember that historical returns (as mentioned above) are in no way a guarantee of future returns, but at High Rock we work darn hard to get our clients the best possible risk-adjusted returns as we possibly can.

Today is webinar Tuesday, where we will discuss the above as well as developments in global geo-political and economic circumstances and financial markets with our clients and how all of it impacts portfolio strategy for our and their wealth management and portfolio strategies. We will post this on our website at or about 5pm, so feel free to watch and listen: http://highrockcapital.ca/current-edition-of-the-weekly-webinar.html

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