JPMorgan Chase & Co.’s CEO, Jamie Dimon, warned investors yesterday that an “economic ‘hurricane’” was looming for the U.S. economy and to prepare for impact, reported Bloomberg.
Markets have struggled since the end of 2021, with volatility the only constant, and it’s a pattern that Dimon believes will extend going forward. Dimon believes that the war in Ukraine coupled with aggressive Fed actions will spell hard times ahead for the economy and markets.
“Right now it’s kind of sunny, things are doing fine, everyone thinks the Fed can handle it,” Dimon said.
The JPMorgan CEO believes that the economy is currently “distorted” due to inflation and that makes it difficult to get accurate measurements. This distortion combined with the quantitative tightening that the Fed is undertaking — where the central bank begins shedding bonds from its portfolio as it works to reduce its ballooning balance sheets — in addition to increasing interest rates will ultimately spell disaster.
“That hurricane is right out there down the road coming our way,” Dimon said. "We just don’t know if it’s a minor one or Superstorm Sandy. You better brace yourself.”
Ride Out the Storm With DBMF
Investors looking for a fund that has performed well during volatility, as well as trend-followers who are considering funds performing above their moving day averages should consider the iMGP DBi Managed Futures Strategy ETF (DBMF ).
DBMF is a managed futures fund designed to capture performance no matter how equity markets are moving. The fund seeks long-term capital appreciation by investing in some of the most liquid U.S.-based futures contracts in a strategy utilized by hedge funds.
As of June 1, the fund was selling for $31.85 per share and was above both its 50-day simple moving average of $30.80 and its 200-day simple moving average of $28.42. The simple moving average is one of the easiest ways to calculate moving averages; the SMA adds all of the daily closing prices within the time frame and then divides by the number of days. Trend-followers who utilize technical analysis to invest generally seek to buy funds that are performing over their moving averages and sell when they fall below.
DBMF allows for the diversification of portfolios across asset classes that are uncorrelated to traditional equities or bonds. It is an actively managed fund that uses long and short positions within derivatives, mostly futures contracts, and forward contracts. These contracts span across domestic equities, fixed income, currencies, and commodities (via its Cayman Islands subsidiary).
The position that the fund takes within domestic managed futures and forward contracts is determined by the Dynamic Beta Engine. This proprietary, quantitative model attempts to ascertain how the largest commodity-trading advisor hedge funds have their allocations. It does so by analyzing the trailing 60-day performance of CTA hedge funds and then determining a portfolio of liquid contracts that would mimic the hedge funds’ performance (not the positions).
DBMF takes long positions in derivatives with exposures to asset classes, sectors, or markets that are anticipated to grow in value and takes short positions in derivatives with exposures expected to fall in value. Under normal market conditions, the fund seeks to maintain volatility between 8%–10% annually.
DBMF has a management fee of 0.85% and an additional 10 bps for other expenses listed in the prospectus.
For more news, information, and strategy, visit the Managed Futures Channel.