Here are a few snippets from Astoria’s ETF Insights. Make sure you click the link below for the PDF which goes into more detail!
o One of Astoria’s big calls for 2018 was to hedge risk assets and we see no reason to change that view. In fact, we have increased our hedges as the year progressed.
o This late cycle discussion is exhausting. Market pundits have argued we are late cycle for the past 3 years. How many people have a good track record of timing AND profiting from where we are in the economic cycle?
o US large cap stocks are unattractive at the index level. We just finished a blow off the top earnings season and US stocks on aggregate couldn’t rally. That is concerning. We think tighter financial conditions were a headwind for asset prices in 2018.
o Rest of the World (RoW) equities still provide a greater margin of safety, better EPS prospects and more leverage to global growth. There are some pockets of US stocks which are attractive. However, the overarching theme in your portfolio should be value, quality & and mixing in other factors (Astoria likes momentum, carry, trend) to further enhance your portfolio risk characteristics.
o Liquidity being pulled the system globally is the one risk factor that keeps us up at night. We don’t have a model for this liquidity unwind (and we doubt anyone has a good one either). Be careful here. There is a direct linkage between volatility and liquidity and most portfolios aren’t properly diversified based on our findings.
o Broad market cap weighted indices are dangerous – they provide little margin of safety, are concentrated in expensive tech stocks, and vulnerable to growth shocks. Astoria believes diversifying across multi factor strategies is the better risk reward. Why? The evidence shows that higher risk adjusted returns can be achieved when combining factors in a portfolio.
Best, John Davi
Founder & CIO of Astoria
For full disclosure, please refer to our website: https://www.astoriaadvisors.com/disclaimer