Here is your Mach 1 Market Update for March 16th, 2020!
1. This is a good reminder that markets can sometimes make violent moves to the downside in a very short period of time.
These type of events are unpredictable, which is why we have always been an advocate for protecting a portion of your retirement portfolio with index annuities.
When the market is down, we want to draw your retirement income from your annuity, giving our market-based accounts (i.e. TD Ameritrade) time to recover. For those of you who do not have any index annuities as a part of your strategy, you should set up a planning meeting soon with one of our advisors.
2. This is also a good reminder of why we hedge.
It is impossible to predict when the market is at a high, or when it is at a low. Our Buy & Hedge Retirement portfolio is designed to get 65-90% of the upside of the S&P 500, while protecting your downside risk to 8-10% over a 12-month period. As of Friday, March 13th, 2020’s market close, this strategy is down approximately 7.7% YTD, versus the Dow which is down 19% YTD. It is working. And, just as importantly, we are positioned to get most of the upward movement in the market as it recovers.
3. We moved our HiPOS strategy to cash over a week ago, which turned out to be a very good move.
We plan had discussion with our team Sunday evening and we looked at market futures to discuss whether Monday was a right time to put this cash back to work in the market. After review, we have decided that stocks are very cheap right now, so rather than move back into HiPOS, we will likely move these accounts into stocks to take advantage of these lows. Once the market begins to recover, we will likely move this back to a non-correlated strategy such as HiPOS. By making this move, I believe we will recover much quicker than simply moving back into HiPOS.
4. As for our Internet Advantage Long/Short Strategy/Q’s strategy (AI-based strategies), the PUT option protection in these portfolios worked beautifully during the downturn.
On March 13th, 2020’s sharp move up, the PUT option prevented us from showing much gains. Even with the move, however, our PUT options are still profitable (i.e. they are worth more than we paid for them). Reducing our downside protection will help us get more of the “bounce” as the market begins recovering. Once the market has recovered at least half of it’s losses, we’ll begin to hedge the way we always have.
5. As for our Large Cap Equity strategy, ZBIG, SPYG, and Internet Advantage Best Equity picks (AI Long): these strategies are designed for our clients who are more risk tolerant and/or have a longer investment time horizon.
As such, these strategies took no defensive actions during the downturn and will thus get the full recovery as the market recovers from here. If you are in one of these strategies and have discovered with this downturn that you do not want this much risk, then you should set an appointment online or give us a call at (479)-876-2100 to talk to one of our advisors to discuss whether you would like a strategy change.
The Mach 1 Financial Group Team
Mach-1 Financial Group, Inc. (“Mach-1”) is an SEC Registered Investment Adviser located in Bentonville, AR. Mach-1 may only transact business in those states in which it maintains a notice filing, or qualifies for an exemption or exclusion from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability. Third party ratings and recognitions are no guarantee of future investment success and do not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client nor are they representative of any one client’s evaluation. Mike Huckabee has been remunerated and is not a client of Mach 1 Financial Group, Inc. Mike Huckabee is not affiliated with, nor does he endorse Mach 1 Financial Group, Inc.