Resources & Investment Updates From Komara Capital Partners

Resources

5 Common Money Management Mistakes And How to Avoid Them

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What Is A Will?

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What Is A Trust?

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What is the Best Business Entity Type For You?

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What are the 9 Essential Estate Planning Documents You Need in Florida?

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Monthly Investment Updates

Trend Following’s Response To Delayed Rate Cuts

We believe a significant advantage of trend following is its ability to help investors manage emotions and behaviors by providing a clear, adaptable plan for any market scenario.

This systematic investing strategy aims to generate alpha through investment returns, but also to maintain discipline and consistency in the face of market fluctuations. In our view, trend following excels at managing market outliers — those rare, unpredictable events that can significantly impact performance. For example, NVIDA’s market cap has reached $2.6 trillion, $890 billion higher than all the companies in the S&P 500 Energy sector combined. Such unprecedented events underscore the need for a robust plan for navigating these exceptional occurrences.

Last month we discussed the tendency of markets to experience downturns and how trend following often takes a wait-and-see approach during small declines. Like we discussed could happen, April’s U.S. equity market declines were erased in May, as the market bounced back and set new all-time highs. This illustrates that trend following is less about predicting outcomes and more about maintaining a disciplined process. This investing approach enables decisive action without second-guessing, which we think is a significant advantage.

In this month’s Investment Update, we discuss our continued wait-and-see approach in fixed income, which has been significantly affected by what’s been happening — or not happening — with interest rates. Despite predictions of cuts in 2024, higher rates have persisted. Trend followers like Komara Capital Partners have navigated this uncertainty by adhering to our rules, which has allowed us to benefit from the high yields of short-duration instruments.

But first, here’s a summary of the global asset classes utilized in our portfolios and their exposures for June.

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Don’t Underestimate the Value Of ‘Wait & See’

The S&P 500 looks like it will close down in April. The ride has been particularly volatile, with the S&P at one point down 5.5% as of April 19.

Spoiler alert: we are not reducing U.S. equity exposure heading into May. As intermediate- to long-term trend followers, we design strategies that generally keep us invested during times like this, which happen with more regularity than one might realize. We intend to (hopefully) ride out what we believe may be, over the long term, immaterial downside volatility.

While passive asset managers might make a similar argument about not getting anxious when routine declines happen, we differ from the passive crowd because we absolutely intend to act when there are material downtrends. We purposefully designed the timeframes utilized by our systematic investing process to ignore noise but react when there’s meaningful evidence of a trend change. We believe you need a time-tested, repeatable mechanism to alert you to the difference.

In this month’s Note, we put the S&P 500’s performance in greater context, specifically relating to monthly declines of 5% or more. Additionally, we discuss how one of the biggest benefits of trend following is its ability to influence investor behavior by applying a disciplined, repeatable process that can help investors stay rational during unsettling times. In our view, this is the key to long-term compounding and will help our clients achieve their financial goals.

But first, here’s a summary of the global asset classes utilized in our portfolios and their exposures for May.

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Investment Update Archive

Shouldn’t We Be Enjoying this Ride?

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Mistakes of Omission Are More Costly Than Bad Investments

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The Impact of Short Term, Incremental Improvements On Long-Term Success

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Oh Come, All Ye 2024 Predictions!

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