US Large, Small and Micro Cap strategies are among top performers in 2018
2018 Year-End Summary
2018 was very stressful for investors. After a euphoric market rally in January, the entire gain was erased by the sharp declines in February and March, which kept the S&P 500 in negative territory up until May. Unfortunately, relatively calm market conditions (despite various displeasing geopolitical news) over the summer followed by a “new high” in September quickly changed to a highly volatile environment with the apogee of December’s massive “run to safety” broad sell-off. As a result, the S&P 500 finished 2018 with a -4.4% return.
QAS Long-Only Stock Selection Model Indexes
QAS long-only concentrated portfolio models finished the year in a slightly negative territory, but significantly outperforming relative to their respective benchmarks.
QAS S-134 US Micro-Cap index was among the best performers throughout the year, finishing with +0.8% return, while its benchmark (IWC) declined by -13.1%.
The broad-based panic decline across all sectors is the main attribute of the bear market. As it was adapting to changing market conditions, QAS’s stock selection algorithm was gradually replacing technology, industrial and financial stocks with health care, telecom, consumer staples and utilities sectors during the October-December period. This active rotation technique provided our clients with a defensive mechanism during a broad-based market sell-off. As a result, significant outperformance relative to benchmarks was achieved.
This defensive allocation structure remains in place as we enter 2019. Moreover, the S-132 US Large Cap Index included a 30% allocation for “safety basket” ETFs (Treasury and Gold) during the January 2019 rebalancing (January 2, 2019).
QAS Long-Only ETF Model Indexes
QAS long-only ETF Models experienced multiple regime changes during 2018. The volatile market conditions across asset classes and geographies triggered a rotation into protective regimes several times throughout the year. The tactical “multi-regime” allocation technique worked well in 2018 as most ETF models outperformed their relative benchmarks and provided good starting positions for a possible rebound in 2019.
The QAS China Opportunity model (S-131) has been in the defensive regime (90% allocation in GSY ETF) for the majority of the year. The maximum defensive regime allocation remains in place for this model as we enter 2019.
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Happy New Year from QAS!