OVERVIEW

The S&P 500 gyrated around during the week, trying to parse every sign as to whether the Fed might begin to cut back on its bond buying and start talking about when it might begin to raise rates.  This hyper focus is out of concern for rising interest rates, which would hurt US Large Cap Equities (hence, the S&P 500) and US Government Bonds.  As a result, the S&P 500 continued its trendless action on display since mid- April.

However, the economic news was not equivocal.  Manufacturing left no doubt about its current strength which should build through the summer.  The services sectors were just as strong with the May reading hitting a record high going back to 1998.  The May Jobs Report was a respectable 559,000 new jobs; however, certain subcomponents in the report and the manufacturing and services reports make clear government policies are holding back new employment, not demand from the economy.  Overseas, Japan is showing renewed strength which should add to the global recovery.

With the trendless action in the S&P 500, Emerging Market Equites outperformed Foreign Developed which outperformed the S&P 500.  Small Caps led Large and Value led Growth.

Interest Bonds managed a fractional gain from an even smaller decline in rates, both of which are at odds with the strength in economic news.  More consistent with that strength was the outperformance of Credit and Blend Bonds.

Oil prices broke to a new recovery high based upon OPEC’s decision to retain production cuts through July and US oil inventories reported at below their 5-year average.  That led Energy to outperform Precious and Industrial Metals which were negative, the latter somewhat inexplicably.

Week ending June 4, 2021

Weekly Commentary

PERFORMANCE

TAG TACTICAL STRATEGIES: Global Macro

All three core strategies outperformed their proxies due to allocations in Emerging Market, Foreign Developed and US Small Cap Value Equities and Credit Bonds.

Tactical Income’s positive return was driven by its overweight allocation to Credit and Blend with added enhancement from its Energy Pipelines position.

Tactical Equity outperformed its proxies due to allocations in Emerging Market Small Cap and Large Cap countries and the US Energy Sector.

RPg STRATEGIES: Quantitative Formula

Tactical US Equity outperformed its proxies in part from its overweight allocations to Energy and Financials.  Tactical US Equity FT had the same outperformance for the same reasons.

Tactical Global Balanced outperformed its proxies from similar sector allocations and Credit and Blend Bonds.

 

OUTLOOK

The job disincentives holding back employment are well understood.  Accordingly, they are the focus of much discussion which we believe will lead to remedy either through corrective policy actions or attrition.  Accordingly, we believe employment will not hold back the further growth in the economy.  

 

The TAG and RPg strategies remain allocated to this strong growth outlook

 

We welcome your comments on the foregoing.

Please direct them to support@riskparadigmgroup.com

Important Disclosures:
Risk Paradigm Group, LLC (RPg Asset Management or RPg) is a registered investment advisor with the U.S. Securities and Exchange Commission (SEC). Tactical Allocation Group (TAG) joined Risk Paradigm Group, LLC and became a division of the firm on July 22, 2016. Additional information regarding Risk Paradigm Group, LLC can be found on our website at www.rpgassetmanagement.com. RPg does not provide tax or legal advice. Please consult an independent tax advisor for additional guidance.

This material has been prepared solely for informational purposes and is not to be considered investment advice or a solicitation for investment. Performance provided is past performance. Past performance is not indicative of future results. Investments may increase or decrease in value and are subject to a risk of loss. As with any investment strategy, there is potential for profit as well as the possibility of loss. No representation or warranty is made that any returns indicated will be achieved. Investors should consult their financial advisor before investing.

Any projections, market outlooks, estimates or expectations of future financial or economic performance of the markets in general are forward-looking statements and are based upon certain assumptions and should not be construed as indicative of actual events that will occur. Actual results or events may differ materially from those projected, estimated, assumed or anticipated in any such forward-looking statements. Information contained herein is as of the period indicated and is subject to change. Any views expressed herein are those of the author(s) at the time of writing and are subject to change without notice.

The information contained herein includes information obtained from sources believed to be reliable, but we do not warrant or guarantee the timeliness or accuracy of the information as it has not been independently verified. It is made available on an “as is” basis without warranty.

This material is proprietary and may not be reproduced, transferred or distributed in any form without prior written permission from RPg. RPg reserves the right at any time, and without notice, to change, amend, or cease publication of the information contained herein. RPg may change any exposures and compositions reflected herein at any time and in any manner in response to market conditions or other factors without prior notice.

References to Indexes: The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the equity performance of larger companies in the U.S. Please note that an investor cannot invest directly into an index.

Risk Disclosures: Concentration, volatility, and other risk characteristics of a client’s account also may differ from the information shown herein. There is no guarantee that any client will achieve performance similar to, or better than, the strategy mentioned herein.

Sources: Bloomberg.

For more information, including risks of investing in our strategies, visit our website at www.rpgassetmanagement.com.