MRM Commentary

Commentary

Monthly Investment Commentary

February 2021

      Start of the Year

          After a strong start to January, most equity markets gave up their gains as the month came to a close. Developed market equities ended the month down 1%, although emerging markets significantly outperformed, ending January up about 3%. Initially, the global rollout of vaccinations and the promise of further fiscal and monetary stimulus helped the market to overlook concerns about virus driven restrictions. Stimulus expectations rose after the surprise Democratic sweep in the run-off election for the two Senate seats in Georgia, which completed Biden’s blue wave.



      MRM NET COMPOSITE PORTFOLIO RESULTS (As of 1/31/2021)
      MRM Group claims compliance with the Global Investment Performance Standards (GIPS®).
      Please contact MRM Group to obtain a Compliant Presentation and/or MRM's list of Composite descriptions.

      MRM Portfolio

      Vaccines
      Over the month though concerns about delays to the supply of vaccines to Europe increased, raising the possibility that the “bridge over troubled waters” might have to be longer than expected. A group of relatively small and heavily shorted stocks also rallied strongly as a group of retail investors coordinated a short squeeze, forcing some hedge funds to close out their shorts while also selling some of their long positions. This technically driven sell-off helps explain the slump in equities towards the end of the month and, in our opinion, is not a reason for concern for long term investors given the likely strong rebound in growth that will accompany the rollout of vaccines.

      Economics
      Robust economic data and a moderate winter wave of Covid infections continued to support risky assets in north Asia. Strong returns from Greater China contributed to the outperformance of emerging market equities. Defensive assets, such as high quality bonds, were on the back foot in the first weeks of the month. But as risk assets sold off, government bonds regained some of their losses, with the ten year treasury ending January down 1%.

      US
      The macro data is painting a mixed picture of the US economy. January’s flash-purchasing managers’ indices (PMIs) continued to point to expanding economic activity, with the manufacturing index at 59.1 and services at 57.5. The housing market is another area of strength, with construction starts rising in December at the fastest pace since 2006 and accelerating home prices. Property values gained 9.1% from a year earlier, which was the biggest jump since the spring of 2014. On the downside, Covid is taking its toll on the labor market again. December was the first month since April that the US economy shed workers. Consumer confidence stabilized but is still significantly below pre-Covid levels.

      MRM'S VIEW

      The news flow in January reminded us of two important things. First, governments and central banks are fully committed to support the economy with massive fiscal stimulus and very easy financing conditions. Second, January showed us that Covid remains a risk. New highly infectious strains and the risk that existing vaccines might be less effective against some mutations remind investors that the bridge to the post-Covid world might be longer than we all wish for, at least in some parts of the world. After a strong run in risky assets followed by the recent pause for breath, staying optimistic.

      Source: JPMorgan

      MRM model holdings as of December 31, 2020

      Allocations

      IMPORTANT DISCLOSURES

      MRM Group, Inc. (“MRM”) is an SEC registered investment advisor and an independent management firm that is not affiliated with any parent organization. Using quantitative selection methods, each MRM strategy searches within a well-defined universe of securities, using consistent investment criteria to identify attractive investments and create diversified portfolios. MRM seeks to provide long-term capital growth.

      Allocations

      The portfolios do NOT use inverse or leveraged ETFs. Universe vehicles may change, from time to time, when approved by the principal of MRM Asset Allocation Group at its sole discretion.

      BENCHMARK NOTES

      Effective Nov. 1, 2016 the Dynamic Overlay benchmark was changed to Morningstar’s Tactical Allocation. The benchmark was applied retroactively to the beginning of the performance period, January 1, 2008. This change had the net effect of placing the Dynamic Overlay Model Portfolio in a more favorable light than would otherwise have been the case if we used the blended benchmark described below. Although this change had a favorable impact on the comparative effect on the model’s performance but we believe the change in benchmark more appropriately aligns with our Dynamic Overlay Strategy in that it is designed a tactical allocation rather than a static blended benchmark of 75% S&P 500 Index Total Return and 25% MSCI EAFE. Morningstar’s Tactical Allocation Category averages returns for the peer group based on the return of each fund within the group, for the period shown. The S&P 500 Index with dividends is an unmanaged composite of 500 large-capitalization companies whose data is obtained from the Standard & Poor’s website. S&P 500 is a registered trademark of McGraw-Hill, Inc. The MSCI EAFE Gross Index is a free float–adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada, with data from the MSCI website using price with reinvestment of dividends. The performance of blended benchmarks is shown for comparison because MRM uses securities which track indices related to these products. The Dow Jones US Select Dividend Index comprises 100 stocks and aims to represent the U.S.’s leading stocks by dividend yield. An investment cannot be made directly into an index.

      DISCLOSURES

      MRM Group claims compliance with the Global Investment Performance Standards (GIPS®). MRM has been independently verified for the periods January 1, 2008 through December 31, 2020. The verification report is available upon request. Verification assesses whether (1) MRM has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) MRM’s policies and procedures are designed to calculate the present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.

      Valuations are computed and performance is reported in U.S. dollars. Client performance may differ based upon the structure of a particular investment program. For example, some programs are structured as wrap fee programs in which trading costs and brokerage commissions are included in one all-inclusive wrapped fee. As such, these costs may be higher than if the client were to pay trading costs and brokerage commissions separately. The standard management fee is 2.0%. Deviation from the model’s diversified structure may result in different risk, return, and diversification characteristics and would therefore not be representative of the models.

      All information contained herein is for informational purposes only. This is not a solicitation to offer investment advice in any state where it would be unlawful. There is no assurance that this platform will produce profitable returns or that any account will have results similar to those of the platform. Past performance is not a guarantee of future results. You may lose money. Factors impacting client returns include individual client risk tolerance, restrictions client may place on the account, investment objectives, choice of broker/dealer or custodians, as well as other factors. Any particular client’s account performance may vary substantially from the program results due to, among other things, commission, timing of order entry, or the manner in which the trades are executed. The investment return and principal value of an investment will fluctuate dramatically, and an investor’s equity, when liquidated, may be worth more or less than the original cost. Investors should consider the investment objective, risks, charges, and expenses carefully prior to investing.

      Investors should not rely on charts and graphs alone when making investing decisions. Investments in securities of non-US issuers involve investment risks different from those of U.S. issuers, including currency risks, political, social, and economic risks. Net-of-fees returns are presented after advisor, management, custodial and trading expenses. The net of fee returns are calculated using actual management fees. The actual fees charged vary and range from .5% to 2.2%, depending on the size of the account and the custodian.

      If you wish to modify or impose reasonable restrictions concerning the management of your account, or if your financial situation, investment objectives, or risk tolerance have changed, please contact your MRM Group investment advisor representative or contact the Manager at (800) 233-1944. We will contact you at least annually to determine if your investment goals, objectives, and risk tolerance have changed.

      All MRM platforms are suitable for long term investing. Please read the fact sheets and disclosures for each platform carefully before investing.

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