A Market Regime-Based Research Approach
While a rising tide lifts all boats, a falling one sinks all of them. The same applies for risky assets during bull & bear market regimes. We believe that it is essential to identify these regimes that are able to adapt to new circumstances in a timely manner. Such a market regime-based research approach will deliver more predictable and stable results by minimizing the risk of unfavorable entry- or exit points while maximizing return opportunities. This approach ensures that the most powerful force in the universe, also known as compound interest (Albert Einstein), will work in our favor.
The Most Effective Investment Strategy: Avoiding Unfavorable Market Regimes!
The left table shows the hypothetical yearly returns of three portfolios, whereas one of them is representing the market. The right table shows the payoff of hypothetical USD 100 invested in each portfolio. The first portfolio (Market) represents a standard benchmark, whereas Portfolio 1 and Portfolio 2 focus on minimizing losses during unfavorable market regimes. There you can see that just by minimizing larger losses in the third year, Portfolio 2 and even Portfolio 1 are scoring higher returns in the long run (122/146 USD vs. 117 USD). Another major advantage of avoiding losses is that the underwater period (peak-to-trough decline) for the investor is also significantly lower. Therefore, the risk of an unfavorable entry point for an investor following such a strategy is also reduced to a minimum. For example, an initial investment in the market portfolio in year 2 would have been unprofitable for 3 years. A stark contrast to the payoff character of the Avoiding Losses Portfolios. These considerations are building the cornerstone of our investment philosophy.
WallStreetCourier is an independent quant-research boutique specialized in identifying market regimes and shifts. The research, mainly focused on the S&P 500 index and major commodity markets, is helping clients to capitalize on sustained regime-based trends, identify major shifts in a timely manner and is hence providing actionable regime-based trading ideas.
The family-owned top-down research boutique was established in 1999. Robert and Rudolph Koch, Chief Strategist and CEO, conduct the reports and are developing the models behind the quantitatively driven research. Rudolph earned its PHD in finance, while Robert has a long history in the asset management industry as award-winning portfolio manager.