August was another strong month for equities with the S&P 500 gaining over 3%. Many indices including the S&P 500 reached new highs and August marked the seventh straight month that the S&P 500 posted gains. This is the longest streak since 2018. The bulk of the markets’ gains came at the beginning and end of the month with a decline around mid-month. Volatility declined during the month while choppiness was below average. Worries about the Covid-19 Delta variant, inflation and labor shortages were overshadowed by primarily dovish statements from the Federal Reserve. That said, the Fed’s comments pointed toward tapering later this year. Regardless, earnings exceeded expectations providing yet another tailwind for equities. In addition to earnings, many economic numbers were better than expected including job creation and unemployment which fell to 5.2%.
Our counter-trend model posted a negative return as it spent the vast majority of the month short. This was primarily due to the lack of a choppy, volatile market as noted above. Our relative value model posted solid positive results for the month in spite of a spike in volatility at mid-month. Our hybrid momentum models were short the majority of the month but were still able to post positive returns. They correctly identified the market downdraft around the middle of the month. Overall, our diversified portfolio gained over 1% for the month and is up nearly 7.5% for the year.