MVGMMA Index Maintains Equity Exposure through June

The MarketVector™-GammaRoad U.S. Equity Strategy Index (MVGMMA) employs a rules-based, adaptive process to allocate between U.S. equity exposure and Treasury Bills exposure based upon its fundamental, behavioral, and trend-based measures for U.S. equity market risk. 

The powerful equity rally continued through June as the S&P 500 Total Return Index returned +5.09% for the month and has now returned +6.20% year-to-date. After reallocating to 33% S&P 500 exposure and 67% T-Bills exposure in mid-May, the MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) maintained its positioning through June and returned +1.93% for the month, which brought the strategy’s year-to-date return to +3.17%.

A natural topic for us to explore this month is how we might interpret the strategy’s conservative positioning as the market is making new all-time highs. Over the years we have witnessed considerable debate on the favorability of buying all-time highs for any market. This debate often reflects two schools of thought:

• The contrarian-minded investor might expect this to be an unfavorable entry point, given that a market making a new all-time high has likely just experienced a significant run already, and therefore the opportunity for further gains is limited. 
• The momentum-minded investor might find this to be an attractive entry point, as a market that is making new all-time highs is likely showing considerable strength on an absolute basis. 

The contrarian investor accepts the risk of missing considerable upside, while the momentum investor accepts the risk that the recent strength has run its course and the market subsequently reverses direction. Both approaches have merit and can provide valuable risk management elements to nearly any investment process. 

For this month’s strategy update, we decided to look through MVGMMA’s full research period since its base date of January 29, 1993 to examine prior periods where only 1 of the strategy’s 3 measures are bullish and the S&P 500 Index is within 5% of its all-time highest close.

To learn more about the strategy’s current positioning in the context of the market's recent new all-time highs, please access our full strategy update here. 

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