The month of April showed weakness for the AEX, with the index down 2.33%.
For April, the figures for the RVM systems were: RVM Strategy +4.31%; RVM Retirement +2.65%.
May was a strong month for the AEX, with a gain of +5.18%.
For May, the figures for the RVM systems were: RVM Strategy – 1.99%; RVM Retirement + 2.08%.
The systems outperformed the index in April, but underperformed in May.
Let's explore that in more detail.
THE MONTH OF APRIL
Although the systems appeared to be performing well, even higher returns could have been achieved. We underestimated the market recovery in April, and our trend system was unable to correctly identify a new long signal on the AEX during that month due to the highly chaotic price movements.
Market watchers are familiar with the story, but let us tell our version of it.
THE TRUMP CRASH OF APRIL 2025
Trump caused the markets to implode by starting a bizarre, even insane trade war on April 2.
That wasn't exactly something to be expected, but there had been a short signal trend in the RVM systems earlier, and this time we decided to observe this trading signal.
The positions were therefore already downward-oriented in March, with a considerable duration.
We had a so-called put spread, which means that we had limited the risk of the downside insurance to the cost of the insurance, but there was also a limited maximum return.
What Trump did next, crashing the market, was great for our put spread.
At RVM Retirement, part of the portfolio has been buy & hold for more than six years, with positions that benefit from price increases in the underlying value, so such positions are naturally affected by price declines; but RVM Strategy only had the put spread, and that system performed better in the Trump crash.
The disadvantage of a put spread is that, in the event of extremely chaotic price movements, it is not easy to close at a good price. So the value you see in your portfolio is not the value you will get if you want to close your deposit.
This also applies to stock prices in a crash; it applies to everything that is present in the crash.
You can think of a crash as a sandstorm, during which people have to stay indoors because if they go outside, they can't see anything and only get sand in their eyes.
So just wait a moment, that's what you always do in a crash.
Our position increased nicely in value during the crash, but there was still a lot of potential left, due to the time value that was still in the position.
Our mistake was that our trend system was unable to immediately identify a long signal in this chaos, even though it came fairly quickly after what turned out to be the low point of the movement on April 7.
On April 11, we received another trend long signal, and the position should have been closed.
But at that point, we still considered the price movement too chaotic to be able to say that this new long signal should be observed.
To stay with the metaphor: at that point, we still thought it was a sandstorm, and we stayed indoors.
The second long signal came at a less favorable point, and by then much of the profit from the short position had already disappeared, but in hindsight we observed this correctly, and we are very satisfied with that.
Research has shown that many young investors and retail investors quickly started buying during the sharp and rapid decline. The thinking was carefree, apparently: everything is much cheaper now, so let's go shopping.
In hindsight, these carefree investors were right.
The professionals, who tried to calculate the consequences of the bizarre import tariffs and feared an even greater decline, were proven wrong. The market quickly judged the Trump administration's actions to be clownish, corrupt, and not to be taken seriously, and the market was right, while the concerned professionals were wrong.
THE MONTH OF MAY
In May, everything else proceeded much more as we are accustomed to with the system. Some shorter-term positions in options were again possible, which form the backbone of our system. The longer-term short position was hedged in a responsible manner.
The – which you see here at RVM Strategy in May – was in fact not a negative result, but the profit on the current positions that existed from March onwards declined somewhat in May.
The fact that Retirement was still positive in May was due to the excellent performance of our fixed interests. They performed so well in May that they more than compensated for the declining profit on the option position.
That concludes the explanation of the results.
DEALING WITH MARKET MANIPULATION
What may also be important in the current situation is our view that it is ultimately not in the US government's interest to crash the global economy, including its own. So if the Americans cause market declines, there is a good chance that the manipulated rise will also be part of the plan of action, just as was the case in April.
This makes it likely that market declines are worth buying into.
That is what they have been in recent years, but we know that there are also bear markets, which are essentially not worth buying into for a few years, with 1929–1932 being the ultimate example of this, a decline that never really became worth buying into.
More recently, of course, it concerned the periods 2000-2003 and 2007-2009.
These bear markets could not simply be bought; it was better to sit them out completely without any stock positions.
No one knows whether an initial decline will turn out to be the prelude to a new 1932, 2003, or 2009, but my generation of managers/investors has grown up with this, so to speak; we have had to navigate these bear markets ourselves.
But under the current manipulation, we would say: the mafiosi who are now in power in the US have no interest in a new 1932.
THE WEAKNESS OF THE DOLLAR
European investors in US securities should take this into account.
We track the S&P 500 in euros on a daily basis, and until the end of May, it was very negative for European investors, down by as much as 10%.
This is truly a lot and has not been seen for many, many years. We therefore decided in May to temporarily exit dollar-denominated investments.
Our long-term portfolio is therefore on hold until further notice, as we invested exclusively for buy & hold in the US.
Of course, we don't know whether that will prove to be the right choice. America's strongest companies can increase in value so much that the currency effect can be negated. We will know in a few months' time whether we have made the wrong decision here.
We are closely monitoring the currency pair; there is currently a long-term short signal for the USD, but the short term could be very different.
That concludes this update.
Good luck with your investments!
Sincerely,
On behalf of Van Megen Systematic Trading,
Ruud van Megen
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