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Third Quarter 2015 Commentary

Third Quarter 2015 Commentary

At the beginning of the third quarter our Market Risk Indicator (MRI) had risen above the middle of the Neutral range. With seasonal factors and what I would term ‘market fatigue’ the third quarter didn’t look like it was going to offer any further upside. We had also accumulated substantial cash reserve positions in all of our portfolio strategies heading into the quarter.

Several technical factors also weighed in showing deterioration in market breadth and increasing divergence in market participants’ activities. It was as if investors were talking themselves into a market correction. As it turned out they were successful.

As the equity markets sagged in August, the bond markets improved. By the end of

August the SignalPoint process had triggered buys in several business sectors, style ETFs and geographically concentrated positions. It was the first broad based cycle of purchases we have had since late in 2011 and early 2012.

Weakness continued through the end of the third quarter of 2015. While price declines weren’t as sharp as the initial decline in August, several ETF positions triggered further buying. The declines provided both the technical and fundamental changes necessary to shift SignalPoint’s MRI from its high neutral status at the beginning of the quarter to bullish territory. The bullish MRI confirmed our buying activity and is now recommending a new, lower cash reserve for the equity strategies. Moreover, the MRI is currently at its lowest level since early in 2012.

The Federal Reserve has delayed its decision on rate hikes for the present time, thus continuing with very low short, mid and long term interest rates. This took some pressure off long dated bond funds allowing them to rise.  There was some offset to the healthier treasury conditions in that corporate bond funds experienced some decline reflecting the weakened stock markets.

Our SignalPoint strategy performance remains weak for the year with single digit losses in most accounts, with the exception being our income oriented portfolios.

Diversification in the income strategies helped to preserve value. We believe, the lower market risk as noted by the MRI and the shift of significant cash reserves to positions that declined bodes well for the future of these equity strategies.

We welcome feedback from our clients. Please feel free to contact us should you have questions relative to performance, market risk and their current status.

 

Thomas M. Veale

Chief Investment Officer

SignalPoint Asset Management, LLC
Office Hours: 8:00 am—4:30 pm Monday—Friday
1201 E. Walnut Street, Springfield, MO 65802
Phone: 877.769.9980