QUANT / DEVCON 2017
On September 15, 2017 a close group of professional traders, quants and portfolio managers convened at the elegant Gran Morsi. We discussed our market outlook and methods to measure price action and volatility.
Strong message from "Dr. Copper" which tends to lead bullish developments in oil, gold and silver. Prepare for a near-term sell set-up in copper, while a broader breakout suggests pullbacks should be used to buy. The result is bearish for the U.S. Dollar, which shows initial signs of peaking from March 2017. On the sector front, price action in energy and healthcare support relative outperformance. Overall, U.S. equity markets are trending well, but there are some worrying signs with fading momentum and bearish seasonality. - DevCon Panel, 09/2017
T E C H N I C A L A N A L Y S I S
MARK NEWTON, CMT
Managing Member, Newton Advisors
Newton explained there is a fallacy of using news-flow to explain why stocks are moving. The reality is that price action shows some of the most extreme corrections in history have taken place following extended runs, which turned down from new high territory.
Technical analysis spots attractive risk/reward opportunities and acts as a risk management tool in various market environments and time-frames. We can apply this to a near-term lift in yields and USD, which caused the gold price to stall. Keep in mind, the rally this August in gold exceeded a longer-term price downtrend.
S Y S T E M A T I C A P P R O A C H
JOHN KARLE, CFA
Market Strategist, Nautilus Investment Research
Karle presented a systematic, data driven process to mine vast amounts of market data. As a result, the audience was able to uncover patterns hidden in the noise.
Nautilus anticipates rising volatility, even as the S&P 500 continues a bullish trend above the 200-day moving average. Further, seasonal studies indicate post election year caution. Healthcare maintains a bullish outlook, with +4% upside according to a 1-year parallel trend channel. U.S. Dollar peaked in March 2017 according to an 8-year cycle.
A S S E T A L L O C A T I O N
Managing Director & CEO, Chelsea Global Advisors
Talisse introduced a top-down asset allocation framework to the group. A higher probability of success with less decisions strengthens the case for strategic asset allocation and portfolios with dynamic weightings.
Assets that pay off in bad economic states are very valuable, while noting that Europe and Japan have high equity risk premiums. For signals, credit spreads typically lead the cycle. Synthetic spreads matter more than cash spreads.
Build real wealth: defer consumption, harvest risk premiums, keep transaction costs low, defer taxes.
Q U A N T S T R A T E G Y
Founder and CEO, QuantConnect
Broad showcased the QuantConnect platform, which capitalizes on investment opportunities from a community of quants by selling alpha to hedge funds.
"We believe the crowd can find better investments faster and cheaper than hedge funds" says Broad. As a result, QuantConnect is one of the largest quant communities in the world with 40,000 engineers and data scientists. The platform is a robust research environment with algorithmic labs for backtesting, live trading and white label integrations. And the free data library is massive!
P R O D U C I N G A L P H A
Executive Director, VTFinTech
Calderon provided sharp insight on passive and active investing. His successful years as a portfolio manager at Fidelity Investments allowed for a unique take on navigating global markets.
On producing alpha with a global mandate, Calderon concluded that earnings matter for stocks and much of European earnings are in fact globalized.
Regarding active asset allocation, there is a clear value proposition:
first, a global mandate and active process; second, incorporate multi-asset building blocks; and third, value-added benefits result from producing contrary opinion.