by Chase Thomas and Harvey Sax
Interest rates remain a central consideration for equity markets. Rates are at levels not seen in more than 20 years, and further increases remain a concern. While corporate earnings growth has been positive, that growth has been concentrated among a limited group of companies. The timing and extent of any broader market effects from current interest-rate levels remain uncertain.
Higher fixed-income yields are also changing the relative appeal of bonds and equities, particularly for retirement-oriented investors. These conditions make it important to evaluate market exposure and individual strategy positioning in the context of changing interest rates and investor objectives.
MTD: +2.41% | YTD: +8.2% | 1-Year: +7.22%
Approximately 3.7% below prior high. Performance before fees.
MTD: +4.0% | YTD: +19.65%
Approximately 5.0% below prior high. Performance before fees.
MTD: +2.6% | YTD: +16.54% | 1-Year: +16.91%
Approximately 2.0% below prior high. Performance before fees.
MTD: +2.42% | YTD: +33.56% | 1-Year: +39.31%
Approximately 0.6% below prior high. Performance before fees.
Oil-related positions have lost value through time decay as oil prices have traded within a relatively narrow range over approximately the past two and a half weeks. As accounts return to their prior highs, the remaining oil positions are being rolled or closed to allow those accounts to resume their standard positioning.
Several long-dated equity option contracts, known as LEAPS, expire in January. These contracts provide the equity exposure within the Synthetic Strategy and would ordinarily be rolled within the next one to two months. Clients with questions about the timing of these adjustments should contact their advisor.
The Synthetic Strategy holds equity exposure through LEAPS, with the remaining capital invested in SGOV, an exchange-traded fund holding very short-term U.S. Treasury securities. The maximum loss on the LEAPS themselves is limited to the premium paid, while other positions within the strategy carry their own risks. Because SGOV holds short-term Treasury securities, its price is generally less sensitive to interest-rate movements than longer-term bonds.
If bond prices decline sharply during a period of market stress, the investment process allows the team to consider reallocating a portion of SGOV holdings to government, municipal, or corporate bonds at higher yields. Such a shift is not intended to be made in anticipation of that decline.
MTD: +1.6%
Performance before fees.
The Insiders Fund recorded gains on all but one trading day during the month. The fund began the month with a significant cash position, and most of that cash has since been deployed.
The investment approach continues to emphasize return generation while maintaining an acceptable level of risk. Rising interest rates remain a consideration for equity markets, and higher bond yields may increase competition for investor capital, particularly among retirement-oriented investors.
Zero Strategy accounts
Synthetic Strategy accounts
Performance is net of fees. Strategy figures reflect all accounts in each strategy viewed together. Individual account results vary, depending in part on when trades were placed.
The views expressed reflect current market commentary as of the date of this communication and are subject to change without notice. Performance figures are preliminary, unaudited, and shown before applicable fees and expenses unless otherwise noted; actual investor results may differ based on fee structure and the timing of contributions or withdrawals. Nothing herein is a guarantee or forecast of future performance. This material is for informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any security, fund, or investment strategy. Past performance is not indicative of future results. All investments involve risk, including possible loss of principal.
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