MRM Commentary

Commentary

Monthly Investment Commentary

December 2020

      ECONOMIC UPDATE

        • A very challenging year ends with positive developments on the Covid-19 vaccine front, but the recent surge in cases has triggered fresh restrictions in parts of the U.S.
        • Markets have been well-behaved in the wake of the November 3 election, and the Treasury curve flattened from pre-election levels once a “blue wave” appeared a lesser probability
        • The November 5 FOMC minutes included discussion of enhanced guidance for any changes to future asset purchases



      MRM NET COMPOSITE PORTFOLIO RESULTS (As of 11/30/2020)
      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

      The Final Month
      We have finally (and thankfully) reached the final month of 2020. This challenging year is ending with encouraging news on the Covid-19 vaccine front. Pfizer and Moderna have both reported trial results that were approximately 95% effective, and as of November 30, both companies have applied for emergency authorization from the Food & Drug Administration. It seems like years have passed since the November 3 election day, and despite the noise surrounding the results, financial markets have responded more rationally. Looking ahead to 2021, should we expect more of the same, or will the economic and market landscape materially change? We will be on watch. While the vaccine news is clearly a positive, there are still questions regarding the timing, distribution, and usage rate among the population.

      Fiscal Aid
      The near-term economic outlook will depend heavily on what, if any, bridge support Congress provides in the form of fiscal aid. Senate Republicans and House Democrats appear unable to reach an agreement in Q4, and as such, economists at some firms, including J.P. Morgan, are projecting negative GDP growth in Q1 2021. Jobless claims rose for two consecutive weeks in November (for the first time since July), and if the November jobs report shows a pause in the labor market recovery, there will likely be increased political pressure on Congress to get something done sooner rather than later.

      Fed Lessons from QE Past
      The Federal Reserve has taken extraordinary measures in 2020 to support the flow of credit, including everything from a zero-bound policy rate to asset purchases to municipal and corporate lending facilities. While it would seem there is little left to do, the central bank still has dry powder. The Fed could increase current asset purchases, or it could employ other measures, such as yield curve control. The latter surfaced as a potential option in June. Fed Chair Powell has made clear his opinion that more fiscal support is needed to support the U.S. economy.

      MRM'S VIEW

      The S&P Index has gained immensely in about eight months off its low of March 23, 2020. The early leadership favored economically sensitive, and cyclical sectors but with a large-cap, growth, “stay at home” bias. We believe the theme change in mid-November is very sensible and likely sustainable. We see the market moving higher. We remain bullish.

      Source: ALM First / ICON

      MRM model holdings as of September 30, 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 September 30, 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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