The Mosaic Global Fund had a -2.99% return for the month of January.

The year started with worries about the state of the global economy. This fear sent stock market lower on a large scale. China was leading on the downside with a drop for the month of more than 24%. Concerns about their currency, the renminbi, unclear communication from policy makers and the economy slow down concerns resulted in heavy selling. Bond markets recovered lost ground from December and showed strong returns. The global concern triggered a long awaited rally in the gold price which rose strongly throughout the month.

The Mosaic Global Fund, came into the month with an overweight in stocks. This position was gradually reduced during the month and due to the weakness in stock markets globally will go into February with a very reduced stock market exposure. It was interesting to notice that after having seen relative weakness in European stocks compared to US-stocks now US markets also felt the pain. Especially Nasdaq had a very weak month and lost over 7%. Despite the recovery in gold, the commodity sector (ETF DBC), continued to show weakness and showed another loss of over 4% for the month. Emerging market also sold off but showed relative strength with around a -5% loss for the month. As we expressed in our last monthly report we are cautiously optimistic on emerging markets with the caveat that they need to fulfill our positive trend requirements to be considered for allocations.

Going into February the Mosaic Global Fund will have a strong over allocation towards bonds with a minor European equity position. While gold has showed some strength there is a more sustained move needed for our models to include gold in the portfolio. The Fund lost money in our stock market holdings and made money in bonds during the month. The strong declines in stocks resulted in an overall negative result.

Looking at the current state of mind in global stock market we would like to come back to something we discussed in this forum during last year and that we have been communicating frequently about with clients. Our feeling is that stock markets have seen the high for this cycle and will now continue lower from here. As always, we approach the market systematically which means that should we see renewed strength in stocks our system will take control and get us into these markets again.

However, looking at previous periods of turbulence we can see that, for example during 2007/2008/2009 when markets started to wobble last time, we saw strength in bonds of course, but we also saw strength in gold, commodities and emerging markets during the time just before the crisis, and just after the bottom was in during the spring of 2009. Interestingly enough, per our last monthly report, we can now see strength in, gold and bonds, with some relative strength in emerging markets and a totally over sold commodity sector as a whole trying to move higher.

Being systematic in our investment approach we would never invest outside the scope of our developed Trend and Momentum Filters, but we can’t avoid to some similar price action with the last time we saw real market declines. The best part is that the Mosaic Global Fund, due to our Trend Filters where out of all strongly down trending stock markets and made money in up-trending bonds, gold etc during this period. In our back-testing both 2007, 2008 and 2009 were really strong performing years for the Fund. We therefore look forward to some potentially volatile markets with the confidence that we have the necessary tools to make money irrespective of market direction.

Please reach out to us on this email, or give us a call on +352 202 033 27, to find out more about the Mosaic Global Fund and how the Fund is managed with our Trend and Momentum Filters. We look forward to speaking with you soon.

To Your Investment Success!

Per-Olov Jansson & the Cardea Investment Team


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