Strong corporate earnings and economic tailwinds propelled the markets higher for October with the S&P 500 index achieving another record close. Consumer confidence remained elevated with significant demand for goods in the face of supply chain disruptions. As a result of demand outstripping supply, inflation continued to be an issue. Nevertheless, consumer sentiment was high, buoyed by a potent government spending package. The S&P 500 index was up 7% and the Nasdaq 100 index gained 7.3% as investors continued to buy any dips. Both indices climbed in near linear fashion especially from early October on. Bond yields generally rose as central banks indicated that they were prepared to remove accommodative monetary policy.
Credit markets continued to decouple from equity markets calling for a correction. This happens from time to time but was exacerbated by the large market gains resulting in losses for the hybrid momentum model. Our relative value model posted modest gains while our counter-trend model had minor losses. As expected, the counter-trend model fought the uptrend and spent the latter part of the month short. The end result was a loss for our diversified portfolio. This was a classic example of the uncorrelated nature of our strategies albeit not the desired outcome.