Logical Invest Investment Outlook - July 2018

Our top 2018 investment strategies, year-to-date :

SPY, the S&P 500 ETF, returned +2.52%.

Market comment:

General investor sentiment is quite bearish. The most recent AAII Investor Sentiment survey shows only 28% of investors believe the markets will do well in the next 6 months, while 40% are bearish and 30% are neutral.  No wonder, as the topic of upcoming tariffs and trade wars dominated media. Furthermore, the Federal Reserve raised its target for the federal funds rate to a range of 1.75%-2.00% and upgraded the anticipated number of future rate hikes to four for 2018, reflecting a hawkish bias. Both events caused the dollar to surge further as investors fled emerging markets for the safety of interesting bearing U.S. cash. It was not a good month for foreign markets.

Current central bank interest rates. Anyone tracking pre and post crisis rates will find this picture quite odd with Australia and New Zealand offering lower returns than the dollar. Table courtesy of fxstreet.com

China (FXI) fell by -6.7%, Brazil (EWZ) by -8.5% while the broad emerging markets ETF (EEM) was down -4.53%. Gold fell again this month by -3.6% while TLT, the 30 year Treasury ETF was slightly up at +0.64%. The big winner for this month was Mexico at +6.8% probably due to positive expectation for the newly elected president. ZIV, which we use at our MYRS strategy, was up +6.9 percent by June 15th only to loose as much in the second half, finishing the month at -0.56%. SPY was slightly up at +0.56%.

The month’s best strategy was the Nasdaq 100 which held two winners, namely NFLX (+11%) and Amazon (+4%). The two Universal Strategies, did not track each other well as they used different hedges. The non-leveraged UIS, using a more sophisticated hedging algorithm, was invested in GLD (-3.61%) while the most ‘simplistic’ 3x UIS used TMF (+1.49%) as a hedge. 3x UIS came in at +1.49% while UIS lost -2.36% for the month. Most other strategies came in slightly negative while the global rotation strategies lost an average of -2%. The worst performer, as expected, was the World Top 4 strategy.

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