As I read morning headlines for July 22nd (Sunday evening), the first thing across my screen was that the "market bounce" first half 2019 had caught the massive Bridgewater hedge fund off-guard. Immediately I am thinking this must mean a massive loss, unrecoverable, and given its size ($150 billion or so), this could have implications for the markets in the weeks ahead. I continued on with my morning but had this in the back of my mind. I thought about it some more - wondering how a seemingly disciplined trader like Ray Dalio and Bridgewater could have a "massive loss" in this market environment. While I don't know all the inner workings, their philosophy is not unlike ours at Auspice. They follow trends identified in one fashion or another, with rigorous risk management.
Then I read the article where it is reported that Bridgewater Pure Alpha was down 4.9% to June 30. 4.9% - less than 5%. This mid-summer "wrong-footed" headline maker is a result of a less than 5% pullback as equity and bond markets have bounced back sharply after correcting in late 2018.
This is a perfect example of thinking small. Here is a fund that is non-correlated to the stock market making over 14% in 2018 while the S&P was down 6% and it starts 2019 by correcting a modest amount while the S&P rallies.
I encourage investors to think bigger.
Rates are dropping - historically this means the Fed is concerned about credit quality and the health of US institutions and this could help the stock market. However, critics contend that historical recessions stemmed from easy money credit bubbles leading to market weakness. Either way, it will likely bring a strong difference of opinion, which means volatility and risk taking. Typically, this is a good environment for quantitative asset/hedge fund managers and trend followers.
With a record-setting 11th year of economic expansion and rising stock markets, is the fact that a top performing fund manager was non-correlated and negative while the stock market rallied really the biggest worry? We recommend betting on those that made money when others did not historically. Think bigger.
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Futures trading is speculative and is not suitable for all customers. Past results are not necessarily indicative of future results. This document is for information purposes only and should not be construed as an offer, recommendation or solicitation to conclude a transaction and should not be treated as giving investment advice. Auspice Capital Advisors Ltd. makes no representation or warranty relating to any information herein, which is derived from independent sources. No securities regulatory authority has expressed an opinion about the securities offered herein and it is an offence to claim otherwise.
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