BlueOrange Asset Management October Results

Our weighted average return in October was -3.88%. Since 2015, we have generated a net return of +40.48%.

In terms of investment strategy performance, our weighted average net returns for October were (a) -1.36% for conservative strategies, (b) -6% for balanced strategies, and (c) -2.97% for aggressive strategies.

October was a brutal month. In all of 2017, the S&P 500 index had 12 trading days where the daily change in price exceeded 1%. October had 10 such trading days. The monthly performance for key equity index ETFs were as follows: S&P 500 index -6.91% (SPY US), Euro Stoxx 50 index -8.18% (FEZ US), and MSCI Emerging Markets index -8.76% (EEM). Bonds outperformed equities, but there was nowhere to hide in the fixed income space as well. The Vanguard Total Bond Market ETF was -0.86% (BND US), the iBoxx $ High Yield Corporate Bond index (HYG US) was -1.98% and the JPMorgan Emerging Market Bond index (EMB US) was -2.42%. Ugly numbers. The only safe haven was the US dollar, which increased 2.59% versus the euro.

So what happened?! Put simply, the market went from being enthusiastic to very worried in an extremely short time period. Why? As always, there is a multitude of factors. Economist Scott Grannis has designated the current market panic attack as ‘global angst’. He writes “a weakening Chinese economy, budding tariff wars, concerns about Fed tightening, a fragile Eurozone, weakening emerging market economies, rising oil prices, and all coupled with the fact that we are entering the 10th year of an economic expansion (which by itself makes investors quite nervous – how much longer can the good times last?). None of these factors have appeared out of the blue however; they’ve all been headwinds for a while, but it seems they have rather suddenly combined into something like a perfect storm.” We agree. We also firmly believe that none of these challenges are insurmountable, nor need threaten global prosperity in the mid to long term.

On a positive note, everyone that had been insisting that a sell off was imminent was finally proven right for the first time since September of 2011 – the last time the S&P 500 experienced such a large drawdown. For those who are interested in historical market data, we would like to point out that over the very next month – October of 2011 – the S&P staged a staggering rally of +10.77%. Moreover, from September 30th, 2011 to October 31st, 2018, the S&P 500 has managed a total return of +137.10%. Yes, there are evidently times that history has shown it to be wise to sit on the sidelines, but historical evidence weighs heavily on the side of those who continue to be invested, and, if possible, take advantage of market selloffs.

If you have been “waiting for a correction”, we would love to hear from you. Why wait another seven years?

On behalf of our Client Portfolio Management team, I thank you for your continued trust and support!

Pauls Miklaševičs

FULL DISCLOSURE: Please note that the opinions expressed in this blog should in no way be considered as investment advice or a solicitation to buy or sell securities.

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