Strategy Spotlight: Tempus Smart Growth Series

The Tempus Approach to Investment Management

The economy is not the market, nor is the market the economy, but they do exhibit correlation.  There has not been a major US equity market correction without a recession in several decades.  No one can predict where markets are heading and timing the market has been proven to be futile.  However, behavioral forces and observable market dynamics can lead us to position risk in a way that has historically proven effective.

We analyze multiple data points relative to economic and market risk to determine which exhibit historical relevance.  A combination of these data points has exhibited an ability to effectively manage risk over time.  We believe equity markets are efficient but are influenced by investor behavior, interest rate & inflation effects, leverage & cost of capital.  Quantitative techniques can be applied to these themes to dynamically adjust risk exposure.  Harnessing and determining the relevancy of this data is important in making decisions.

Tempus Smart Growth Series Strategies:  Alpha, Adaptive, Equity, Opportunity

All Tempus Smart Growth strategies seek to overweight equities in periods of strong market trends and reduce risk in periods when the market exhibits aggressive selling pressure.

Strong Market Trends

  • Federal Reserve policy rate hikes are less likely
  • US economy grows unfettered
  • Debt markets indicate that relative borrowing costs are improving

Weak Market Trends

  • Firms that are highly levered tend to exhibit risks prior to those with more stable financial conditions
  • Higher borrowing costs
  • Debt markets indicate that relative borrowing costs are deteriorating

Strategy allocation and positioning

The aggregate analysis and output of the hundreds of economic and market data points determines strategy positioning on a monthly frequency.

Tempus Smart Growth Alpha, Opportunity

“Grow First, Protect Second”

  • 100% Equity
  • 0% Equity if BOTH Economic and Market Risks are concerning

Tempus Smart Growth Equity

“Protect First, Grow Second”

  • 100% Equity
  • 50% Equity if Market Risk is Concerning
  • 0% Equity if BOTH Economic and Market Risks are both concerning

Tempus Smart Growth Adaptive

“Grow with Protection”

  • 50% Equity when Economic and Market Risks are neutral
  • Up to 100% Equity when risks are low
  • Down to 0% Equity when risks are high

Bringing it All Together

The Tempus Smart Growth Series leverages economic and market data research that has historically correlated with global equity returns.  The strategies:

    • Seek to manage the risk of a portfolio over a full market cycle and reduce risk at or near recessionary time periods.
    • Are prone to have a high level of return differences versus the market (tracking error), but this is by design.
    • May suffer from periodic whipsaw effect in environments where the risk adjustment will be too infrequent to catch dramatic up and down swings in the market.

Financial Advice is offered through Mid Atlantic Financial Management, Inc. (MAFM) a Registered Investment Advisor. Tempus Advisory Group is not a registered entity or a subsidiary or control affiliate of MAFM.  The information contained in this e-mail and in any attached files is confidential and intended for internal use of the individual named in the email. This information should not be duplicated or distributed unless an express written consent is obtained from Tempus Advisory Group in advance.  If you are not the intended recipient, please notify me immediately and delete any attachments.  The views expressed here reflect the views of the Tempus Advisory Group Investment Committee as of 4-12-2019. These views may change as market or other conditions change. This information is not intended to provide investment advice and does not account for individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Past performance does not guarantee future results and no forecast should be considered a guarantee either

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2019-05-31T18:37:00+00:00