June was a strongly negative month for the AEX at -7.53 for the month.
RVM Strategy was + 0.73 % in June. The algorithm was working properly and there was nothing special to report systemically, except that + 0.73% is statistically among RVM Strategy's weaker months.
THE STATISTICS ON PROFITABILITY
It would be interesting to take a look at what causes that, a statistically lower return.
It does not have as a cause the much lower market, that is not of influence. More of an influence may be, a lack of a certain kind of volatility, or just a very high volatility.
And there are other factors that come into play.
The common denominator is: we have no influence over it, and so degree of profitability is not part of the system.
What comes first? Risk management.
Risk management determines the possible return, dictated by our algorithm.
NO TARGET RETURNS
That is why we never have return expectations; there are no target returns. Anyone who uses target returns cannot, by definition, be a good risk manager. This is because good risk management implies that the manager has to resign himself, to a certain extent, to the dominance of the market. Those who try to evade this will sooner or later incur (too) large losses.
So with RVM Strategy, and therefore partly with RVM Retirement (because of the same momentum system as part of the strategy), the return depends partly on what 'the market gives us'. There are days, weeks and months when it is strict by an algorithm, and then the return will also be lower in general.
The bottom line for us is: the return on RVM Strategy has to be positive. That's what the algorithm has to ensure. How positive, that's up to the market.
RVM RETIREMENT WE SAW AS THE BETTER INVESTMENT AT THE END OF JUNE
RVM Retirement became more promising and interesting than RVM Strategy in June because of the long-term interests present.
Indeed, calculations indicated in June that a tipping point for the positive could be close at hand for the stock market.
We had, as always, calculated on January 1 all the levels that could start to matter in 2022, and in June one of the most important calculations came into focus.
It was wonderful to see what happened next.
This update is written on Monday morning, July 25, with a week full of important numbers ahead. What the algorithm indicated in June turns out to be correct in retrospect. Buyers have entered the market around "our" calculated price levels.
This indicates that the algorithm has calculated the correct market levels. Whether this has increased the likelihood that the rest of the calculation made on January 1, 2022 is also correct, of course, we do not know for sure. We continue to follow it with interest and everything that happens will be recorded in our statistical database.
THE COURSE UNTIL AS LATE AS JULY 2022
The above already implies that the course of the market in July was strongly in favor of RVM Retirement.
RVM Strategy has had the usual momentum gains so far, there were no unusual ones. RVM Retirement had those momentum gains as well, but added to that were the gains on long-term holdings.
So so far this has been a good month for both systems, but we still have one more week to go,
OUR OPINION ON THE MARKET
You had already read in the May update, written in mid-June, that we were becoming more positive about the stock market. That, of course, had to do with our algorithm and what had rolled out of that for all of 2022.
We are still positive at this point, with one week left in July, but more moderate than we were in mid-June. The upside potential for the market is a bit more limited at the moment, which makes sense after this strong market recovery.
INVESTOR INQUIRIES
Finally, a word on what investors sometimes tell us in their emails and requests for advice and participation in the systems.
"It seems that in a declining market the return on RVM Strategy is lower than in a rising market, while the system gives positive results in all markets. Is this assumption correct?"
Excellent question.
The answer is: no, this assumption is not correct.
The explanation: look at the beginning of this June update. What return is achieved in RVM Strategy is a byproduct of the prescribed risk management.
There may be up markets in which we have to note that the return appears lower than in any other market phase in the past, whether it was up or down.
Conversely, there are down market phases when RVM Strategy returns suddenly appear to have been higher than in other down market phases or up market phases.
RVM Strategy, for example, had a relatively high return in the 2020 Corona crash, higher than in many upward market phases.
So the answer is "no," up or down does not affect the system's return. Other things are more decisive, such as volatility. But there are more factors.
In any case, we have no influence on that, and that which cannot be influenced is not part of the systematics.
As always, you are welcome to attend RVM Strategy and/or RVM Retirement!
Many have gone before you, and after so many years we can also say; once you follow the system, you generally stay.
Sincerely,
Ruud van Megen