Current market environment performance of dynamic, risk-managed investment solutions.
By Tim Hanna
What a year for the markets. The S&P 500 finished up more than 20%—something we’ve only seen four times since 1900. The fourth quarter stood out, with stocks hitting new highs thanks to strong company earnings, Federal Reserve rate cuts, and cooling inflation. The post-election rally gave us an extra boost as well. Looking at market sectors, three groups led the pack: Consumer Discretionary, Communication Services, and Financial stocks.
The Federal Reserve kept things moving with two rate cuts—one in November and another in December. By year-end, the 10-year Treasury stood at 4.57%, reflecting the market’s confidence in the economy’s strength.
The global picture was mixed. U.S. markets outperformed international ones, which shows the value of having a flexible investment approach. We saw this play out in our clients’ portfolios throughout the quarter.
Commodities also told an interesting story. Oil prices rose about 5%, while coffee and cocoa prices climbed higher. Precious metals, like silver, lost ground. Gold, traditionally viewed as an inflation hedge, dropped 0.38% after strong performance earlier in the year. These different trends across commodities gave us good opportunities to adjust positions when the timing was right. The launch of the FPI-subadvised Quantified Eckhardt Managed Futures Fund (QETCX) provides investors with a way to invest in these and other market trends.
Our investment strategies had a solid quarter. Several gained more than 4%, and declines were mostly limited to under 2%—exactly what we want from our risk-management approach. Nearly 20% of our strategies beat the S&P 500, and more than 85% did better than the bond market.
The quarter had its own rhythm. Equities peaked in mid-October, gave back most gains by month-end, rallied after the election in November, peaked for the year in early December, and ended the year near December lows. Our strategies adapted well to these shifts. Our main pattern-recognition stock market strategy beat the S&P 500 for the quarter—a nice validation of our approach.
When we look at different risk levels, it played out just as you’d expect: Strategies taking more risk generally earned better returns. Our more aggressive approaches, especially those using leverage, really took advantage of November’s rally. But we never lost sight of protecting our clients’ money.
As we move forward, we remain committed to our approach: staying nimble, managing risk carefully, and seeking opportunities where they make sense for our clients.