The MarketVector™-GammaRoad U.S. Equity Strategy Index (MVGMMA) employs a rules-based, adaptive process to allocate between U.S. equity exposure and Treasury Bills exposure based upon its fundamental, behavioral, and trend-based measures for U.S. equity market risk.
October delivered the second down month in a row for the equity market, as the S&P 500 Total Return Index returned -0.87% for the month and brought its year-to-date return to +11.77%. The MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) maintained its positioning for a sixth consecutive month and returned -0.51% in September, which brought its year-to-date return to +5.06%.
The midterm election results play directly into the risk dynamic we addressed in our previous update, specifically the mechanism by which the rising cost of capital impacts the present value of future cash flows.
As we illustrated last month, the higher the assumed growth rate and the further into the future the expected cash flow, the more severe the discounting impact on the present value of the underlying asset. We noted in that analysis that “This is the exact profile of the high-growth tech businesses that currently dominate equity benchmarks and venture capital portfolios.” We also observed that “Any slowdown in development defers the time when actual cash flow growth can have a chance to deliver on the currently lofty expectations.”
The midterm election results have now provided a formidable double whammy challenge to the technology sector’s leadership that has driven this bull market’s ascent since the lows in 2022. We explore how the midterm results likely amplify the challenge that the rising cost of capital presents to the equity market in our latest monthly update here.
About the Author(s):
Jordan is the architect of the MarketVector™-GammaRoad U.S. Equity Strategy Index and co-founder of GammaRoad Capital Partners, LLC. Prior to launching GammaRoad, Jordan was the Chief Investment Officer for Legacy Heritage Partners LLC, where he managed the institutional private foundation and family office portfolios. Before joining Legacy Heritage Partners LLC, Jordan was the Senior Investment Strategist for IBM Retirement Funds, where he was responsible for asset allocation and investment risk management for the U.S. pension fund. While working at IBM, Jordan was featured in CIO Magazine’s 2015 Global 40 Under 40 issue. Prior to joining IBM, Jordan was a Principal in Mercer Investments’ New York office with a focus on asset allocation, strategy implementation, and manager selection for endowments and foundations, corporate pension funds, defined contribution plans, and insurance captives. Jordan is a CFA Charterholder and holds a Bachelor of Arts in Economics from Emory University.
For informational and advertising purposes only. The views and opinions expressed are those of the authors but not necessarily those of MarketVector Indexes GmbH. Opinions are current as of the publication date and are subject to change with market conditions. Certain statements contained herein may constitute projections, forecasts, and other forward-looking statements that do not reflect actual results. It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments based on that index. MarketVector Indexes GmbH does not sponsor, endorse, sell, promote, or manage any investment fund or other investment vehicle that is offered by third parties and that seeks to provide an investment return based on the performance of any index. The inclusion of a security within an index is not a recommendation by MarketVector Indexes GmbH to buy, sell, or hold such security, nor is it considered to be investment advice.
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