Weekly report: Increased allocation in commodities
Posted by Erik Martin Hansén
Post date
05/10/2024 Reading time
- 2 min read
The weekly report provides signals from the noise. We summarize models and strategies, and try to decode the market's message with a scientific approach to stay on the right side of the larger trends.
In this edition:
Development of portfolios/strategies
Market commentary
Development of portfolios/strategies
We present the development of four systematic multi-asset strategies and three equity strategies. These are included in our premium package. In the weekly report you can also follow how these strategies develop, change and get an insight into my thinking about them. Our systematic strategies are based on proven rules rather than gut feeling.
Multi-asset strategies during the week
NQ Box Play: +0.6% (passive buy-and-hold with 7 holdings)
NQ Power Play: +1.0% (passive buy-and-hold with 9 holdings)
NQ Tactical Diversification: +1.5% (tactical asset allocation with 9 holdings)
NQ Global Trend: +/-0% (Buying top 3 markets based on time-series and cross-sectional momentum)
Stock strategies during the week
NQ Top Picks Momemtum: -0,7%
NQ Value & Momentum: -0.6%
NQ Volatility & Quality: +/-0%
Market update
The week was characterized by negative sentiment on the Stockholm Stock Exchange, while several global markets acted as diversifiers and showed resilience, including emerging markets, commodities, TIPS and gold.
Friday's jobs report boosted hopes of a soft landing in the US economy, which contributed to a rise in market interest rates. However, we should not be surprised if the jobs figures are revised downwards afterwards, which often happens.
The unrest in the Middle East has pushed up the price of oil by almost ten percent in just one week. This is not an unusual move, however, as oil prices often exhibit large fluctuations. What is particularly interesting is that speculators' positioning in oil is relatively low, which is interpreted positively by players who like to go against the herd.
Our AI model, which guides the allocation in the Tactical Diversification strategy, significantly increased its exposure to commodities earlier this week. It is difficult to say what the model bases this decision on, as it is based on non-linear relationships and analyzes a large number of time series. Simple trend models are easier to understand, both in terms of their decisions and the reasons behind the development.
Several global markets and sectors reached new 52-week highs during the week. These include the iShares Core S&P 500 UCITS ETF, Future of Defence UCITS ETF, VanEck Uranium and Nuclear ETF, SPDR MSCI Emerging Markets ETF, Xetra-Gold ETC, VanEck Video Gaming and eSports ETF and iShares China Large Cap UCITS ETF.
Global markets during the week
OMXS30: -1,4%
S&P 500: +0,2%
MSCI Emerging Markets ETF (SPYM): +1,7%
iShares China Large Cap ETF (IQQC): +12,0%
iShares Commodity ETF (SXRS): +3,9%
Wisdomtree Softs (AIGS): -0,7%
Xetra-Gold ETC (4GLD): +2,0 %
XACT Obligation: -0,5%
Valour Bitcoin Zero: -5,1%
Stock market outlook, 3-6 months
In addition to the trend picture, which is the most important parameter, we also study other factors that affect the long-term primary trend, such as macro, positioning, and seasonal patterns. Since indicators need to be put in context with each other, the analysis increases subjectivity. This assessment does not affect our systematic strategies.
Trend: Bullish
Macro: Bullish
Positioning: Neutral
Seasonal Pattern: Bullish
Published by
Erik Martin Hansen
After studying at Uppsala University, Erik Hansén has worked in the financial industry since 2007 at several brokerage firms and traded privately. In his role as an analyst, Erik has written highly regarded market letters.
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Categories Blog, Market comments, Strategies
Weekly report: Increased allocation in commodities
Posted by Erik Martin Hansén
Post date 05/10/2024 Reading time - 2 min readThe weekly report provides signals from the noise. We summarize models and strategies, and try to decode the market's message with a scientific approach to stay on the right side of the larger trends.
In this edition:
Development of portfolios/strategies
We present the development of four systematic multi-asset strategies and three equity strategies. These are included in our premium package. In the weekly report you can also follow how these strategies develop, change and get an insight into my thinking about them. Our systematic strategies are based on proven rules rather than gut feeling.
Multi-asset strategies during the week
Stock strategies during the week
Market update
The week was characterized by negative sentiment on the Stockholm Stock Exchange, while several global markets acted as diversifiers and showed resilience, including emerging markets, commodities, TIPS and gold.
Friday's jobs report boosted hopes of a soft landing in the US economy, which contributed to a rise in market interest rates. However, we should not be surprised if the jobs figures are revised downwards afterwards, which often happens.
The unrest in the Middle East has pushed up the price of oil by almost ten percent in just one week. This is not an unusual move, however, as oil prices often exhibit large fluctuations. What is particularly interesting is that speculators' positioning in oil is relatively low, which is interpreted positively by players who like to go against the herd.
Our AI model, which guides the allocation in the Tactical Diversification strategy, significantly increased its exposure to commodities earlier this week. It is difficult to say what the model bases this decision on, as it is based on non-linear relationships and analyzes a large number of time series. Simple trend models are easier to understand, both in terms of their decisions and the reasons behind the development.
Several global markets and sectors reached new 52-week highs during the week. These include the iShares Core S&P 500 UCITS ETF, Future of Defence UCITS ETF, VanEck Uranium and Nuclear ETF, SPDR MSCI Emerging Markets ETF, Xetra-Gold ETC, VanEck Video Gaming and eSports ETF and iShares China Large Cap UCITS ETF.
Global markets during the week
Stock market outlook, 3-6 months
In addition to the trend picture, which is the most important parameter, we also study other factors that affect the long-term primary trend, such as macro, positioning, and seasonal patterns. Since indicators need to be put in context with each other, the analysis increases subjectivity. This assessment does not affect our systematic strategies.