A PDF version of this commentary can be downloaded here.

Special Announcement

On Monday, April 13th at 2:00-2:30PM EST, we will be hosting a live strategy review webinar. The webinar will cover:

  • Why shortening duration is not a panacea for rising rates
  • A strategy outlook for Multi-Asset Income
  • A strategy outlook for U.S. Factor Defensive Equity

You can register at https://attendee.gotowebinar.com/register/5053445966609773825

Market Thoughts

Just before market close on April 1st, an entry titled “Announcing the Tesla Model W” was posted to Tesla’s official blog. The text read:

“PALO ALTO, Calif., April 1, 2015 – Tesla today announced a whole new product line called the Model W. As many in the media predicted, it’s a watch. That’s what the “W” stands for.

This incredible new device from Tesla doesn’t just tell the time, it also tells the date. What’s more, it is infinitely adjustable, able to tell the time no matter where you are on Earth. Japan, Timbuktu, California, anywhere! This will change your life. Reality as you know it will never be the same.

Studies have shown the Model W will dramatically improve your health. If you work out. And it’s available in platinum!

No longer will you need to rudely examine your phone to read text messages. Now you can politely stare at the tiny screen on your wrist without anyone noticing.

This is in no way a competitive response to what some other company is doing.”

Shenanigans in the tech space on April Fools’ Day is nothing new. What is new is that the post was picked up by Reuters and other news outlets, who seemed to assume, from the title, that Tesla was announcing a new car.

And that’s when the bots jumped in. There are firms that run automated trading systems focused on scraping news articles, interpreting them via neuro-linguistic programming, and trying to speed to market and trade based on the sentiment of the article.

Tesla announcing a new vehicle model was assumed to be a good thing. Except Tesla was actually just making a joke – likely jabbing at the fact that Apple seems to be toying with the idea of an electric car. Computers don’t seem to be so good with jokes.

More than 400,000 shares of Tesla stock traded within 60 seconds of the blog post going live, popping the price up by $1.50 and increasing the total market capitalization of the company by $185mm.

By the closing bell, the price had receded, order was restored.

We’re sure there are some automated traders who didn’t find this joke to be too funny.

In Our Models

We rebalanced our Risk Managed U.S. Sectors and our Tailwinds Moderate portfolios this week.

Risk Managed U.S. Sectors was rebalanced to reflect the negative momentum our models have identified within the utilities sector. Currently, both energy and utilities have negative momentum signals while the remaining 7 sectors continue to exhibit positive momentum characteristics.

The rebalance in Tailwinds Moderate was triggered due to last week’s changes in Multi-Asset Income as well as the model update that occurred in Dynamic Alternatives at month end. These smaller sleeve changes were enough, in aggregate, to trigger a portfolio rebalance.

Corey is co-founder and Chief Investment Officer of Newfound Research, a quantitative asset manager offering a suite of separately managed accounts and mutual funds. At Newfound, Corey is responsible for portfolio management, investment research, strategy development, and communication of the firm's views to clients. Prior to offering asset management services, Newfound licensed research from the quantitative investment models developed by Corey. At peak, this research helped steer the tactical allocation decisions for upwards of $10bn. Corey holds a Master of Science in Computational Finance from Carnegie Mellon University and a Bachelor of Science in Computer Science, cum laude, from Cornell University. You can connect with Corey on LinkedIn or Twitter.