Stocks continued their torrid pace with the S&P 500 gaining 2.3% in June, putting year to date performance at +15.25%. With the exception of a small blip in the S&P 500 at mid-month, markets rode a pretty smooth uptrend and had very little up and down chop. Inflation reared its head as the Consumer Price Index had its highest reading in nearly 15 years. The concerns were muted as most economists believe the high readings are transient. Markets were buoyed by ongoing Federal Reserve stimulus and a continued increase in Covid-19 vaccinations. The latter placed a focus on the potential for a full reopening to continue to drive economic growth.
Our hybrid momentum model was long all month, so it enjoyed the strong upward trend. Our counter-trend model on the other hand was slightly negative due to a lack of choppiness and volatility. In fact, choppiness for the S&P 500 was a third less than what we experienced in May. In addition, volatility dropped precipitously throughout the month ending 40% lower than May. Our counter-trend strategy thrives in choppy, volatile markets so a lack of either of these factors resulted in muted returns for this model. Finally, our relative value strategy was short during the month taking advantage of declining volatility. Our strategies have low to negative correlation which is one reason they work so well together in our diversified portfolio. Year to date the diversified portfolio has outperformed the S&P 500 despite having significantly less downside risk.