April was again a negative month for the AEX with - 1.83 % for the month.
RVM Strategy was + 1.23 % in April. This time, that result applies only to closed positions. For the first time since 2019, there is also a running position based on what the trend system of RVM Systematic indicates, and that position was still at a loss at the end of April.
In the RVM systems, we use the algorithm almost exclusively; however, in April it also seemed necessary to use the trend system for once, as a protection for existing positions.
RVM Retirement achieved - 0.82%; the momentum strategy here is similar to that of RVM Strategy and it was positive. However, the fixed income holdings in Retirement were negative, although there was an outperformance of the general equity market.
Here, too, there was still the loss-making trend position in the portfolio at the end of April, which has not been taken into account.
For both systems, this ongoing position will be completed in the month of May, so then we will know how it went.
The markets also remained unusually volatileduring the first two weeks of May.
The algorithm we use makes everything relatively "sober", if one can call it that, we always know what to look out for and our trading rules remain intact.
But the results are very unpredictable.
There are market commentators who say that the current market is more like a casino than ever; I do not share that view. It is a perennial characteristic of the market that it leads traders and managers astray. That we are now seeing very high intraday volatility may just be part of it.
What is new is the war in Europe, and very high inflation. We have never seen either of these before in our lives. It is also uncertain how they will develop.
The possibility of using nuclear weapons is also new. It is not easy to imagine what this could mean for the world market. This is a risk reminiscent of Taleb's important work on risk management, "The Black Swan".
Such a "black swan event" would be the use of a nuclear weapon by Russia.
How can an asset manager protect himself against this? One can, of course, take out a long-term insurance policy, a downward insurance policy.
That will cost money. So it is a complicated problem.
For the RVM systems, we have chosen not to insure against such calamities for the time being, but that could change.
There is also another special risk at the moment: it could become peace unexpectedly fast, faster than market followers expect.
This is what we might call 'an upside risk', which no one can properly prepare for, because it too is outside the normal course of the global economy.
The algorithm we use calculates risks for several time phases. But both the use of a nuclear weapon and an unexpected peace lead to price movements that cannot logically be calculated.
In short, the black swan is lurking on all sides.
Fortunately, one thing remains clear: our algorithm has continued to work, whatever has happened in the stock markets and in the world.
So of course we continue to take the positions dictated by the algorithm.
As always, you are welcome to join RVM Strategy and/or RVM Retirement.
Many people have gone before you!
Sincerely,
Ruud van Megen