Below you will find the Columbus strategy highlights for this month.  For more insights and a detailed discussion, including to get the monthly portfolio allocations, please download the report by clicking the button at the bottom of this message.

Time for Renewed Vigilance

  • Bear markets usually start when investors expect them the least!
  • Given its increased allocation to equities last month, Columbus currently stands with a YTD loss of -4.2%, ahead of its world allocation benchmark (GMWAX, down -6.0%) while performing roughly in line with our 60/40 balanced fund benchmark (VSMGX, down -3.6%).
  • Contrary to last month, pundits are now calling for the start of a bear market. This on-going utter change of opinion by market experts is typical around market tops since confusion reigns in the markets!
  • In reality, no one really knows whether a bear has already started or whether we just experienced a bad correction that will set the stage for a renewed bull market.
  • The right approach in such an environment is to stay vigilant and adapt to the market as the data evolves.
  • To gain perspective on how Columbus manages market tops and subsequent bear markets, I strongly suggest reading our special report “Keep Calm and Follow the Data”, published on October 14. This report will help you gain perspective on the nature of bull market tops and the importance of adapting to the data in real-time.  As it is based on data science and statistics, this approach is in stark contrast to the “crystal-ball predictions” proclaimed by most market experts and analysts.  If you don’t have access to our report, please don’t hesitate to contact me.
  • Given the increase in volatility and the lack of market direction, Columbus is taking a prudent approach for November. While greatly reducing stocks and emphasizing the US dollar index, Columbus is also increasing our cash asset (SHY) and taking small positions in bonds and treasuries.  In addition, real-estate has proven resilient in this correction despite the increasing interest rate environment, and Columbus is increasing its existing position in VNQ.

To learn more on how Columbus navigates this market, please download the report and read the discussion in section 6.

Investing is all about risk management and related probabilities, both of which are foundational to growing client’s wealth in the long run.  Although the odds have increased that we are at the onset of a bear market, there is also a very real possibility that the bull market will reassert itself over the coming months.  If this were to happen, Columbus will revert back to a more aggressive allocation, leveraging the intelligence of data to guide its asset allocation at that time.

Please don’t hesitate to contact me should you have any questions.

Best regards,

Jean-Marc and the Laplace Insights team

Backtesting Strategies & Overfitting

Strategy backtesting is often used to test an investment strategy from historical stock or ETF information (usually price).  The belief is that if a strategy performed well in the past, then it should continue to perform well in the future.

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