Markets fell hard on Tuesday after the release of the August consumer price index report, logging the worst single-day of losses since June 2020. The Dow Jones fell over 1,200 points, the S&P 500 closed down 4.32% and the Nasdaq Composite dropped 5.16%
August’s CPI reflected a broad inflation increase of 0.1% month-over-month and 8.3% over the last year, with core inflation rising 0.6% month-over-month, both higher than analyst expectations and certainly market ones. It’s these very investor expectations that could have resulted in such losses, according to Art Cashin, UBS director of floor operations, leading to the potential for markets to possibly revisit the June 2022 lows for markets.
“Certainly the 3900 is just so tempting, and you’re pulling back below the 50-day moving average here. It’s very much about the technicals. It’s not so much that one number made the economy go topsy-turvy. It meant a lot of guys who were making preliminary favorable bets got caught off base,” Cashin told CNBC’s “Squawk on the Street”.
The abrupt downturn after a four-day consecutive positive closing streak for the major indexes marks the latest bear market rally to fizzle as hopes fall apart for a potential easing from the Fed that meets next week to set the next interest rate hike. Volatility remains the mainstay for markets in 2022 as equities and bonds both feel the squeeze.
Investors looking for a fund that has performed well during volatility, as well as trend-followers who are considering funds performing above their moving day averages, should consider the iMGP DBi Managed Futures Strategy ETF (DBMF ).
DBMF is a managed futures fund designed to capture performance no matter how equity markets are moving. The fund seeks long-term capital appreciation by investing in some of the most liquid U.S.-based futures contracts in a strategy utilized by hedge funds.
In a market where technicals matter, DBMF is trading well above both its 50-day SMA and 200-day SMA and has year-to-date returns of 27.44% according to the website.
DBMF allows for the diversification of portfolios across asset classes that are uncorrelated to traditional equities or bonds. It is an actively managed fund that uses long and short positions within derivatives, mostly futures contracts, and forward contracts. These contracts span domestic equities, fixed income, currencies, and commodities (via its Cayman Islands subsidiary).
The position that the fund takes within domestic managed futures and forward contracts is determined by the Dynamic Beta Engine. This proprietary, quantitative model attempts to ascertain how the largest commodity-trading advisor hedge funds have their allocations. It does so by analyzing the trailing 60-day performance of CTA hedge funds and then determining a portfolio of liquid contracts that would mimic the hedge funds’ performance (not the positions).
DBMF takes long positions in derivatives with exposures to asset classes, sectors, or markets that are anticipated to grow in value and takes short positions in derivatives with exposures expected to fall in value. Under normal market conditions, the fund seeks to maintain volatility between 8%–10% annually.
DBMF has a management fee of 0.95%.
For more news, information, and strategy, visit the Managed Futures Channel.
