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RPg Market Commentary

January saw a continuation of the momentum created by the election, however sectors that were the focus of potential policy shifts out of the Trump administration that dominated post-election did not materially contribute to the positive performance of January. Specifically, Financials and Industrials, which were seen as sectors that would benefit from policy shifts like less regulation (Financials) and infrastructure spending (Industrials) were two of the laggards in January. The greatest contributors to performance were the more cyclical sectors like Materials, Technology and Consumer Discretionary. While this supports the cyclical bias of our U.S. equity exposure, we believe our models are suggesting that over a longer period of time Financials and Industrials will re-join the cyclical rally.

Benefits of Tactical

CLIENT-CENTRIC INVESTING: 
UTILIZING TACTICAL MANAGERS TO IMPROVE RISK/RETURN

Characteristics of Client Portfolios

The most common method for building multi-asset portfolios is based on Modern Portfolio Theory (MPT). The biggest issue we have with this approach is that it is not aligned with most investors’ view of risk. MPT utilizes a process that seeks an efficient portfolio with a given level of risk measured by return volatility. This misalignment manifests itself when the market is down 36%, and a portfolio is down 33%. In this case, the manager is patted on the back (receives a bonus) for outperforming their benchmark, and the investor is out 1/3 of their investment...  (click for more)

TAG Market Commentary

January was a sobering up from the highs of the Holidays and Trump post-election rally. In the US, growth stocks far outperformed value as there was a pullback in extended expectations for cyclically sensitive stocks. Economic news showed continued weakness in “capital expenditures” and “manufacturing” while “housing” remained uneven. “Retail Sales” weakness during the holidays raised new concerns about the consumer. Overseas equity markets also outperformed; attractive valuations and continued Central Bank stimulus were drivers for the Eurozone and Japan; a weakening dollar and signs of China stabilization led to even stronger performance in Emerging Markets(click for more)

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