October Commentary

 

Dipsea Capital Fund LP  

 

October  2016 Fund LP Commentary: 

  

October was another relatively quiet month for the U.S. Equity markets.  Prices remained in a narrow range of less than 2.5% during the month, and on a relative basis, volume was subdued for October.  This likely reflects broad uncertainty with the upcoming U.S. Presidential election, a potential interest rate increase in December, and a key vote in Italy on December 4th which could broadly impact the European Union.  As we noted last month, uncertainty abounds!

 

The S&P 500 index ended October down -1.94% for the month.  The Dipsea Capital Fund generated a return of +.43% after fees for October.  Year-to-date, the Dipsea Capital Fund is up 1.86% versus the broad market index gain of 4.02%.   

 

It’s been a year where poles, pundits and conventional wisdom have taken a beating.  This remains a period where having staunch conviction on the results of a binary outcome like the presidential election, is a poor bet.  That said, apart from the election itself, our work is supporting a scenario  with a higher than normal likelihood of a broad rally as we get beyond these catalysts. 

 

This thesis is based upon measurements which state that many participants are aggressively hedged, (investors have purchased adequate protection for their portfolios), economic data is showing a slight acceleration, and retail investors are still in cash or very exposed to the bond market.  All these factors, plus positive seasonality, support an image for higher prices through month end.

 

These scenarios noted, we perpetually defer to our rule based methodology which insists we not predict prices, but rather measure probabilities, execute trades and tightly manage risk. 

 

Thank you for the opportunity to work on your behalf and invest alongside you in the pursuit of delivering steady returns regardless of market environment.

 

Sincerely,    

  

Chris Antonio  

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