The Security Analysis Podcast
Solo Podcast: The Small Cap Value Rally, Backtesting Strategies, Managed Futures
Jul 31, 2024
Discover the thrilling rally in small cap value stocks as they outshine large cap growth. Dive into the intriguing role of managed futures in enhancing portfolio resilience. Explore whether traditional fundamental investing still holds water in today’s market. Unpack the intricacies of effective backtesting strategies and learn why past performance can mislead. Engage with insights on using common sense in investment decisions and the importance of treasuries in achieving balance. Perfect for those curious about the financial landscape!
31:12
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Quick takeaways
- The recent rally in small cap value stocks illustrates the cyclical nature of investment strategies and the importance of a long-term perspective.
- Managed futures can provide uncorrelated returns and diversification, but their high fees and unpredictable performance make them a riskier investment option.
Deep dives
Small Cap Value Performance Trends
The recent rotation into small cap value stocks highlights the cyclical nature of investment strategies, where periods of both underperformance and outperformance are typical. A notable example is the 10% rise in the S&P 600 small cap value index within a single week, emphasizing that these strategies can yield premiums over time as documented in back tests. Despite historical evidence, the future remains uncertain, as the premium may not continue, underscoring the importance of maintaining a long-term investment perspective. Investors should be cautious; short-term performance variations do not necessarily predict future outcomes, and the volatility between asset classes can be unpredictable.
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