We currently find ourselves in an unusual situation, as far as the economy and the financial markets. Due to the coronavirus pandemic, the Federal Government and Federal Reserve introduced massive fiscal and monetary stimulus programs. Though some of the government’s fiscal stimulus programs have ended, many of the Fed’s monetary stimulus programs are, for the most part, intact.
Our belief is that as long as this unusual level of monetary stimulus remains in effect, the stock market will continue to be strong. Which is why the Aqueduct Strategy, offered by LTG Capital, is a great tool for financial advisors to use in helping their clients profit during times like these.
Aqueduct’s strategy is an all-equity basedstrategy which focuses on the level of fiscal and monetary stimulus in the economy. The fund’s manager, Ariel Acuña, closely observes the markets and the economy and when a bear market opportunity presents itself, like it did in Q1 2020, he moves into leveraged ETFs to amplify the market gains.
From there, he monitors the economy and stimulus programs, with a special emphasis on Federal Reserve monetary policy. Once the fiscal and monetary stimulus being employed by the Fed moderates, the fund exits the leveraged ETFs and returns to a long-focused strategy employing a diversified group of ETFs.
Our track record
Returns have been exceptional over the past 11 years. The Aqueduct Strategy is available to RIAs and advisors as part of the Fidelity Separate Account Network. Of the 1,600 strategies in the network, we are one of only two separate account strategies to haveranked in the top 10every single year over the past decade
Not surprisingly, in the same time period the Aqueduct Strategy has outperformed the S&P 500 index by around 1,000 basis points, on an average annual return basis.
Why invest in the Aqueduct Strategy Now?
Now is still a great time to still take advantage of the Aqueduct Strategy. That’s because most of the Federal Reserve’s programs remain largely in effect and will not be significantly withdrawn for some time.
Though the Fed announced it would start reducing asset purchases by $15 billion a month, starting in November 2021, this is very gradual. Up until now, the Fed has been buying $120 billion a month in Treasury bonds and mortgage-backed securities. Some believed that this would derail the bull market but after the taper was announced on November 3rd, the S&P 500 rallied almost 2% over the next couple of days.
Also, the central bank’s newly released economic forecast for the next few years shows the Fed lifting U.S. interest rates in 2022 by justa quarter-point. In its history, the Federal Funds Rate has never been so low(minus the period between Q3 2008 and Q1 2016). And the Fed has gone out of its way to say that the end of the taper does not necessarily lead to Fed Funds interest rate lift off.
Low interest rates tend to positively affect earnings and stock prices. In that period mentioned above, from year-end 2008 to year-end 2016, the S&P 500 more than doubled. And even after the central bank began raising the Federal Funds Rate from near-zero to almost 2.5% over the next few years, the stock market rallied about50%.
The Aqueduct Strategy has a remarkable 10+ year track record of taking advantage of exactly these types of fiscal and monetary conditions that we find ourselves in today.
Advisors can access The Aqueduct Investment Strategy (TAS) through the Fidelity Separate Accounts Network. Take a look online or give us a call to learn more.