A quick assessment from SEM founder and CEO Rick Gage on the current market action and SEM's positioning/response:
The pre-election sell-off last week was interesting in that Treasury Bonds did not rally as they typically do when there is a “risk-off” trade. It will be something to keep on our radars when things “normalize”. There have been periods of time (mid-1990s and mid-to-late 1970s) where Treasuries and stocks were highly corelated.
Since election day the market has enjoyed an impressive rally. It seems like massive amounts of cash has been deployed (or bearish bets unwound) – Treasuries, munis, high yields, emerging markets, developed international, and of course large cap growth all had huge rallies. Small caps have been left behind. I think the market likes that the Blue Wave did not occur so it will be difficult for massive stimulus (and this supports the treasuries rallying as less debt – just a huge amount rather than a massive amount). But still higher chance of larger stimulus with Biden in the white house. COVID comeback may also be hurting small caps. I don’t really understand the rally in Europe though.
I’m especially glad that our core high yield systems hung on. The short-term high yield system sold on 10/26 and is back in as of yesterday. No change in the economic models utilized in the Dynamic portfolios.
Our income models are well positioned and have tacked on 0.7-1.1% just this week. Dynamics have also had a good week. They are overweight large cap stocks and high yield bonds. AmeriGuard and Cornerstone Growth and Max are both beating the S&P 500 this week, up more than 6%. They are also overweight large cap growth stocks.
We'll continue monitoring for any adjustments and will post them here.