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Sage Tactical ETF Strategies 4Q20 Market Review & Outlook

Sage Advisory Services market review for the fourth quarter ended December 2020, discussing what contributed to and detracted from performance for the Sage Tactical ETF Strategies. Q3 2020 hedge fund letters, conferences and more Sage Tactical ETF Strateg

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Sage Advisory Services market review for the fourth quarter ended December 2020, discussing what contributed to and detracted from performance for the Sage Tactical ETF Strategies.

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Q3 2020 hedge fund letters, conferences and more

Sage Tactical ETF Strategies: Equity Allocation

What Helped:

  • U.S. Small Cap
  • U.S. Cyclical Industries
  • International Equities
  • U.S. Value

What Hurt:

  • None

Risk assets ended the year with a flurry, powered by positive developments of a Covid-19 vaccine as well as additional fiscal stimulus from Congress. While virus cases ticked higher all over the world, the continued encouraging readings from consumption data and industrial activity highlighted the continuing recovery. The move in equities was more broad-based than during the summer, with small-cap and value equities joining mega-cap tech in the rally. Overall, equities markets had a stellar fourth quarter, with returns of 12% for the S&P 500, 16% for EAFE, and 19.7% for EM.

The equity allocation posted a positive quarter. The portfolio was and is currently positioned for a continued recovery, which should include a broadening of the rally in style, sector, and region. The rotation into those segments occurred in November in full force and continued into the end of the year, which resulted in solid outperformance of the equity allocation for the quarter.

Notable Portfolio Adjustments During The Quarter:

  • Added cyclical segments, such as mining, transportation, and small-cap equities
  • Increased allocation to emerging markets Asia
  • Trimmed core U.S., EAFE allocations

Fixed Income Allocation

What Helped:

  • Corporate Bonds (HY and IG)
  • Emerging Market Debt
  • Bank Loans

What Hurt:

  • Long Treasuries

Fixed income was a mixed bag in the quarter, with an increase in yields counter-balanced by the outperformance of credit spread sectors. Treasury yields moved into a higher range, catalyzed by fiscal stimulus expectations and positive vaccine news. Those same factors resulted in credit spreads compressing to near-historic lows. Consequently, spread sectors such as corporates, high yield, preferred stocks, and emerging market debt outperformed safer sectors, such as Treasuries and MBS.

The fixed income allocation turned in a positive quarter both on an absolute basis and relative to the benchmark given its lower interest rate sensitivity and overweight to non-core fixed income and investment grade corporate bonds. Corporate bonds, both high yield and investment grade, were the largest contributors to positive performance, while the strategy’s small allocation to long Treasuries was the main detractor.

Notable Portfolio Adjustments During The Quarter:

  • Added Long Treasuries allocation
  • Initiated TIPS allocation
  • Trimmed short corporate bonds

Outlook And Current Positioning

Our view is that for the first half of 2021, the continued economic recovery, supportive policy, and effective vaccines should drive further upside in risk assets, sustain some upward pressure on long rates, and keep reflationary pressures alive. On the economic front, the winter virus surge will no doubt dampen growth out of the gate, but we expect this to be short-lived and for robust global growth of close to 5% for the year.

In addition to major macro risks tied to the virus and the shifting political landscape, the primary return-limiting risk going into 2021 may be valuations, which are less favorable across most asset classes, especially fixed income. Given our views, we enter the first half positioned for upside across our strategies, overweight equities vs. fixed income in our balanced allocation, and overweight credit and higher-yielding fixed income in our fixed income allocation.

The post Sage Tactical ETF Strategies 4Q20 Market Review & Outlook appeared first on ValueWalk.

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New findings on hair loss in men

A receding hairline, a total loss of hair from the crown, and ultimately, the classical horseshoe-shaped pattern of baldness: Previous research into male…

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A receding hairline, a total loss of hair from the crown, and ultimately, the classical horseshoe-shaped pattern of baldness: Previous research into male pattern hair loss, also termed androgenetic alopecia, has implicated multiple common genetic variants. Human geneticists from the University Hospital of Bonn (UKB) and by the Transdisciplinary Research Unit “Life & Health” of the University of Bonn have now performed a systematic investigation of the extent to which rare genetic variants may also contribute to this disorder. For this purpose, they analyzed the genetic sequences of 72,469 male participants from the UK Biobank project. The analyses identified five significantly associated genes, and further corroborated genes implicated in previous research. The results have now been published in the prestigious scientific journal Nature Communications.

Credit: University Hospital Bonn / Katharina Wislsperger

A receding hairline, a total loss of hair from the crown, and ultimately, the classical horseshoe-shaped pattern of baldness: Previous research into male pattern hair loss, also termed androgenetic alopecia, has implicated multiple common genetic variants. Human geneticists from the University Hospital of Bonn (UKB) and by the Transdisciplinary Research Unit “Life & Health” of the University of Bonn have now performed a systematic investigation of the extent to which rare genetic variants may also contribute to this disorder. For this purpose, they analyzed the genetic sequences of 72,469 male participants from the UK Biobank project. The analyses identified five significantly associated genes, and further corroborated genes implicated in previous research. The results have now been published in the prestigious scientific journal Nature Communications.

Male-pattern hair loss is the most common form of hair loss in men, and is largely attributable to hereditary factors. Current treatment options and risk prediction are suboptimal, thus necessitating research into the genetic underpinnings of the condition. To date, studies worldwide have focused primarily on common genetic variants, and have implicated more than 350 genetic loci, in particular the androgen receptor gene, which is located on the maternally inherited X chromosome. In contrast, the contribution to this common condition of rare genetic variants has traditionally been assumed to be low. However, systematic analyses of rare variants have been lacking. “Such analyses are more challenging as they require large cohorts, and the genetic sequences must be captured base by base, e.g., through genome or exome sequencing of affected individuals,” explained first author Sabrina Henne, who is a doctoral student at the Institute of Human Genetics at the UKB and the University of Bonn. The statistical challenge lies in the fact that these rare genetic variants may be carried by very few, or even single, individuals. “That is why we apply gene-based analyses that first collapse variants on the basis of the genes in which they are located,” explained corresponding author PD Dr. Stefanie Heilmann-Heimbach, who is a research group leader at the Institute of Human Genetics at the UKB at the University of Bonn. Among other methods, the Bonn researchers used a type of sequence kernel association test (SKAT), which is a popular method for detecting associations with rare variants, as well as GenRisk, which is a method developed at the Institute of Genomic Statistics and Bioinformatics (IGSB) at the UKB and the University of Bonn.

Possible relevance of rare variants in male-pattern hair loss

The research involved the analysis of genetic sequences from 72,469 male UK Biobank participants. Within this extensive data set, Bonn geneticists, together with researchers from the IGSB and the Center for Human Genetics at the University Hospital Marburg, examined rare gene variants that occur in less than one percent of the population. Using modern bioinformatic and statistical methods, they found associations between male-pattern hair loss and rare genetic variants in the following five genes: EDA2R, WNT10A, HEPH, CEPT1, and EIF3F.

Prior to the analyses, EDA2R and WNT10A were already considered candidate genes, as based on previous analyses of common variants. “Our study provides further evidence that these two genes play a role, and that this occurs through both common and rare variants,” explained Dr. Stefanie Heilmann-Heimbach. Similarly, HEPH is located in a genetic region that has already been implicated by common variants, namely the EDA2R/Androgen receptor, which is a region that has consistently shown the strongest association with male-pattern hair loss in past association studies. “However, HEPH itself has never been considered as a candidate gene. Our study suggests that it may also play a role,” explained Sabrina Henne. “The genes CEPT1 and EIF3F are located in genetic regions that have not yet been associated with male-pattern hair loss. They are thus entirely new candidate genes, and we hypothesize that rare variants within these genes contribute to the genetic predisposition. HEPH, CEPT1, and EIF3F represent highly plausible new candidate genes, given their previously described role in hair development and growth.” Furthermore, the results of the study suggest that genes that are known to cause rare inherited diseases affecting both skin and hair (such as the ectodermal dysplasias) may also play a role in the development of male-pattern hair loss. The researchers hope that the puzzle pieces they have discovered will improve understanding of the causes of hair loss, and thus facilitate reliable risk prediction and improved treatment strategies.

The research was supported by funding from the Medical Faculty of the University of Bonn. Prof. Dr. Markus Nöthen, Director of the Institute of Human Genetics at UKB and co-author of the study, is a member of the Transdisciplinary Research Area (TRA) “Life and Health” at the University of Bonn. The publication costs in open access format were funded by the DEAL project of the University of Bonn.


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Canadian dollar edges higher as retail sales rebound

Canada retail sales climb 2% The Canadian dollar has posted losses on Friday. In the European session, USD/CAD is trading at 1.3446, down 0.28%. Canada’s…

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  • Canada retail sales climb 2%

The Canadian dollar has posted losses on Friday. In the European session, USD/CAD is trading at 1.3446, down 0.28%.

Canada’s retail sales jump

Canada’s retail sales rebounded in impressive fashion on Friday. Retail sales in July jumped 2% y/y, following a -0.6% reading in June and beating the 0.5% consensus estimate. On a monthly basis, retail sales rose 0.3%, up from 0.1% in June but shy of the consensus estimate of 0.4%. The good news was tempered by the August estimate, which stands at -0.3% m/m and would be the first decline since March. The Canadian dollar showed little reaction to the retail sales release.

The Bank of Canada doesn’t meet again until October 25th and policy makers will have plenty of data to monitor in the meantime. The BoC has been walking a tightrope that will be familiar to most central banks, that of trying to balance the risks of over and under-tightening. The difficulty in finding the right balance was highlighted in the BoC summary of deliberations of the policy meeting earlier this month.

The BoC decided to hold the benchmark rate at 5.0% after concluding that earlier rate hikes were having an effect and slowing economic growth. The summary indicated that policy makers were concerned that a pause might send the wrong message that rate cuts might be on the way. With inflation still above the BOC’s target, the central bank is not looking at rate cuts and stressed at the September meeting that rate hikes were still on the table and that inflation remained too high.

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USD/CAD Technical

  • USD/CAD is testing resistance at 1.3468. The next resistance line is 1.3553
  • 1.3408 and 1.3323 are the next support lines

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Quantitative Tightening Is Not Biggest Threat To Global Yields

Quantitative Tightening Is Not Biggest Threat To Global Yields

Authored by Simon White, Bloomberg macro strategist,

The Bank of England’s…

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Quantitative Tightening Is Not Biggest Threat To Global Yields

Authored by Simon White, Bloomberg macro strategist,

The Bank of England’s quantitative tightening program shows that unwinding central-bank bond portfolios, even with outright sales, need not be disruptive for markets. The greater risk for US and global yields comes from positive stock-bond correlations driving risk premia wider.

The BOE has been a pioneer and a thought leader in QT. While the Fed and ECB have only allowed bonds to run off naturally to help achieve their balance-sheet contraction goals, the BOE has sold gilts outright in addition to allowing bonds to mature.

So far, it has not led to any significant market disruption. This enabled the BOE Thursday to increase the pace of reduction in the Asset Purchase Facility (APF) from £80 billion last year to £100 billion over the coming 12 months from October (while holding Bank Rate steady). As colleague Ven Ram also noted, the schedule of maturing bonds next year allowed the bank to keep gilts sales unchanged from last year while increasing the total amount of the APF’s decrease.

The QT watchwords from the bank are “gradual and predictable.” If gilt sales are conducted in such a way, then market disruption should be minimized. The chart below shows the BOE’s own assessment of the impact of bond sales on the market.

The BOE estimates that of the ~40 bps of term-premium increase since the MPC voted to begin QT in February 2022, about 10-15 bps comes from QT specifically – small in comparison to the overall rise in yields since that time.

QT or bond sales, though, are not the most critical risk facing bond prices in the current cycle. Rising and now positive stock-bond correlations threaten to lead to a structural rise in bond risk premium, and lower prices. The correlation is now positive in the US, Japan, and the UK.

In a positive stock-bond correlation world, bonds lose their portfolio-hedge and recession-hedge capabilities, and thus become less sought after. The penny has not fully dropped yet, but the negative term premium for bonds is increasing, and is prone to rising much higher as they become less desirable.

Yields of developed market countries are biased structurally higher, but QT is unlikely to be the culprit. Instead, it allows central banks to reload their capacity for a future time when they may need to restart quantitative easing, in order to stabilize the market from sharply rising term premia.

Tyler Durden Fri, 09/22/2023 - 09:10

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