January 2022

Equity markets were extremely volatile during the month. For example, the S&P 500 dropped 9.80% from the early January high only to rebound over 4% the last two trading days of the month to finish with a 5.86%loss. Likewise, the Nasdaq 100 dropped 15.48% from its late December high yet rebounded over 6% the last two trading days of the month to finish down nearly 10% for January. That made it the second worst January on record for the Nasdaq. Investors had a lot of news to digest including Federal Reserve interest rate hikes, inflation, and escalating tensions in Ukraine. Fed Chairman Powell suggested a likely rate hike in March which he said would be followed by reducing the balance sheet. Economists are now predicting five rate hikes for 2022. On another front, it appears that inflation is more than simply transitory. December CPI rose 7% which was the largest twelve month increase since 1982. Oil traded at levels not seen for seven years.

Needless to say, it was not easy to navigate the ups and downs, but our diversified portfolio had an excellent month gaining 1.3%. This was bolstered primarily by our hybrid momentum strategy, which gained approximately 4% for the month. These indicators were short for the vast majority of the month as liquidity in less liquid parts of the market was not favorable. Finally, our relative value model declined just over 1% as we were short during a spike up in volatility toward mid-month. All of our models performed well within our expectations.