December QuantPulse Portfolio Update

All of the QuantPulse portfolios and books have been updates as of today, December 23, 2018. Also, all the performance figures have been updated. The QuantPulse homepage remains open to the public. To read about the service see this introduction. Now, on to the update.

Performance for the 4-week period ending Dec 21, 2018, worse than the SP500. The 10 stock and 25 stock portfolios were down -10.5%, compared to -8.2% for the SP500. It was a rough 4 weeks. The SP500 is on track for the worst December in a long long time. Underneath the large cap averages the damage to the market was way worse; mid-caps, small-caps, and micro-caps were down -11.6%, -12.9%, and -14.4% respectively. For the year (2018 YTD), the average of the portfolios is underperforming the SP500 slightly, with the Utilities, Microcap, and Momentum strategies leading the way in performance. This past weak even the conservative strategies like utilities and staples experienced heavy selling.

The current drawdown for the overall market is the worst since 20016. This week it beat the 2016 drawdown and is now approaching the 2011 drawdown levels. The same is true for the quant strategies. The graph below compares the quant strategies drawdown to the SP500 going back to 2010. It is a very tough environment but one that has happened before.

As for this month’s portfolio re-balance, you’ll see another month of above average turnover in many of the portfolios. The damage this month was very broad and many stop losses were hit, even more than last month. You’ll also notice a lot more foreign stocks showing up on the buy lists of many strategies. Foreign markets, in particular emerging markets, have been outperforming US markets over the last month.

That’s about it for this update. This month was brutal. There is no other word for it. This is month is yet another stark reminder of what makes these strategies so difficult for many investors. It is one thing to see historical drawdown stats in a spreadsheet or blog post, it is quite another to live through them. But if you can, and put strategies and tactics in place to help you ride out the whipsaws, in the long term the results are worth it.

Finally, let me talk about some changes coming in the new year to QuantPulse. Three big things I plan to do before year end and in early January.

• New strategies: I plan to introduce and start tracking a value strategy based on Greenblatt’s The Magic Formula. And I also plan to introduce at least one low-volatility strategy. Low vol works well with other factors so I may combine it with others.
• Subscription options for individual strategies. I’ll have an options where you can subscribe to just one strategy instead of all of them. This will make the barrier to entry into Quant a lot lower.
• More risk-management options. Now, I only use my SPY-COMP indicator as an overall risk management option. It is only one possibility. Investors may want to use their own or I can introduce others that investors may like better.

Merry Christmas and Happy New Year! Drop me an email if you have any questions.