September Recap: Energy Alpha and Capital Preservation

TLDR: Equity markets fell across the board again in September, but all of our active equity strategies outperformed their benchmarks thanks to a combination of:

(1) Significant upside from our energy stocks and

(2) Protection from our strategic cash holdings which buffered us from the full impact of the market’s pullback.

Here’s some quick context on what happened and why, what we did about it, and our outlook ahead:

1/ What Happened and Why

The S&P 500 and Nasdaq suffered their second straight monthly declines, with September marking their worst month of the year (-4.87% and -5.81%, respectively). Major factors driving the market down included the surge in oil prices (thanks to Saudi Arabia and Russia cutting production) and the jump in bond yields (thanks to economic growth remaining strong even as inflation slows, causing many to rethink their views that a near-term recession would eventually lead to interest rate cuts).

2/ What We Did About It

We’ve been in the “higher for longer” interest rates camp for a while now. I mentioned in my August recap: “This means we’ve been expecting higher bond yields than the market… so when they arrived, we were prepared with strategic cash holdings to buffer against losses.” This story was much the same in September.

The broadest move we made in September was our decision to trim our energy holdings almost across the board. We believe the recent rally in crude oil prices (along with other commodities we have exposure to, such as uranium, coal, and natural gas) may be a bit overextended in the short term. Our long-term thesis remains fully intact, but we elected to pare back positions a bit to crystallize gains and manage risk for clients.

To recap our trades during the month: in Flagship, we bought Nvidia and trimmed Adobe after strong YTD gains. In Opportunities and Offshore, we trimmed many of our energy stocks after a dramatic move higher. We also added to a few semiconductor stocks in Offshore and trimmed our position in luxury goods maker LVMH.

3/ The Path Forward

Also, as you’ll see in the chart above, short-term U.S. Treasuries were one of the best performing assets in Q3 and we believe this has runway to continue for the foreseeable future. Simply put, a “T-Bill and Chill” strategy continues to be attractive with short-term yields at 5%+. Smart Cash is yielding up to 5.33%* and serves as an excellent place for your rainy day fund. We encourage you to check it out here if you haven’t already.

If you have any questions for me or the team, just reply to this email and we’ll get back to you as soon as we can.

Best,

Clay

Co-CEO and Chief Investment Officer

Disclosures:

*Yield is as of 9/28/23. This represents the highest 7-Day Yield currently available among our options. Certain funds have specific investment minimums, which can be up to $3,000. Investors who invest amounts below these minimums may experience lower yields than those advertised. Yields will fluctuate over time, and are not a forecast or guarantee of future earnings.

Titan Global Capital Management USA LLC ("Titan") is an investment adviser registered with the Securities and Exchange Commission (“SEC”). Titan’s investment advisory services are available only to residents of the United States in jurisdictions where Titan is registered. Please refer to Titan's Program Brochure for important additional information. Titan’s affiliate, Titan Global Technologies LLC (“TGT”), is a registered broker-dealer and member of FINRA/SIPC. For more information, visit our disclosures page. You may check the background of these firms by visiting FINRA's BrokerCheck. Contact Titan at support@titan.com. 

This content is intended for informational purposes only. Historical returns do not reflect actual performance of any specific client. Performance figures represent cumulative returns, compiled from the beginning to the end of the given period. YTD Returns are from 01/01/2023 to 9/30/2023. 12-Month Returns are from 09/30/2022 to 09/30/2023. Performance for Automated Bonds are for taxable accounts only; retirement accounts are not invested in U.S. Municipal Bonds. Performance assumes an ‘Aggressive’ risk portfolio for the Flagship, Offshore, and Opportunities strategies. Clients with ‘Moderate’ or ‘Conservative’ risk profiles generally would have experienced lower returns. For more details, see the Strategy’s Tearsheet. Performance returns: (1) do not reflect the performance of an actual client's account; (2) assume the reinvestment of dividends; (3) are net of a 0.90% annual Titan advisory fee as applicable; and (4) do not reflect or guarantee future results of any specific account.

PLEASE NOTE: All Titan performance results related to active equity strategies are based on an 'Aggressive' risk profile and may not always include the use of a personalized hedge. Please visit Titan Hedging Disclosures for more information and full disclosures regarding Titan’s hedging process. For performance results specific to the 'Moderate' or 'Conservative' risk profiles within our active equity strategies, please reach out to us at support@titan.com.

Performance results for any Titan strategies as compared against the performance of Illustrative Benchmarks are also for informational purposes only. “Illustrative Benchmarks” include the Standard & Poor’s 500 Index (the “S&P 500”), the Russell 2000 Index (the "Russell 2000"), and the MSCI ACWI ex US ETF ("MSCI World ex-US"). Titan’s investment program and strategies do not mirror that of the Illustrative Benchmarks, and volatility may be materially different from the volatility included in any Illustrative Benchmarks. The Illustrative Benchmarks are calculated and distributed exclusively by third parties, and not by Titan, and thus Titan cannot guarantee the accuracy or completeness of the data. Reference or comparison to an Illustrative Benchmark does not imply that Titan’s portfolio or strategies will be constructed in the same way as the Illustrative Benchmark or achieve returns, volatility, or other results similar to those of the Illustrative Benchmark.

The S&P 500, the Russell 2000, and the MSCI World ex-US are unmanaged market capitalization-weighted indices of common stocks chosen for market size, liquidity, and industry group representation to represent U.S. large cap, U.S. small/mid cap, and international equity performance, respectively. The S&P 500 and the Russell 2000 results include the reinvestment of dividends and do not reflect transaction costs. The MSCI World ex-US results reflect the expense ratio associated with the ETF, but do not reflect other transaction costs.

Titan's Smart Cash strives for tax optimization, but after-tax yields are estimates, and actual outcomes may vary. Yields are subject to market conditions and are not guaranteed. Smart Cash includes the Titan Cash Reserve and Treasury Fund offerings available on Titan, each with unique characteristics and risks. Please note, the 7-day yields of our Treasury Funds do not forecast future earnings. While Titan can provide general information and guidance, any information provided should not be taken as tax advice as Titan is not a tax professional. Titan strongly recommends consulting with a qualified tax professional regarding your specific tax situation for personalized advice and compliance with tax laws. View Smart Cash Risks & Disclosures at titan.com/smart-cash-disclosures.

Various Registered Investment Company products (“Third Party Funds”) are offered by third-party fund families and investment companies on Titan’s platform as one of many potential investment options available to Titan’s clients, that may or may not be recommended based on an individual client’s investment objectives and risk tolerance. Please review the Third Party Fund’s prospectus in its entirety for a full list of risks associated with investing in the Third Party Fund before making any investment decision. Certain Third Party Funds that are available on Titan’s platform are interval funds. Investments in interval funds are highly speculative and subject to a lack of liquidity that is generally available in other types of investments. Actual investment return and principal value is likely to fluctuate and may depreciate in value when redeemed. Liquidity and distributions are not guaranteed, and are subject to availability at the discretion of the Third Party Fund.

You may view the prospectuses for each Third Party Fund mentioned in this content through the hyperlinks below:

Communications may contain forward-looking statements, which reflect our current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. We do not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. References to specific stock performances are provided for historical context and are not indicative of future results. Valuation assessments in our communications are based on internal analysis and are for informational purposes only. They should not be the sole basis for investment decisions and may differ from others' views or assessments. No warranty is made regarding their accuracy or completeness.

All investments involve risk and the past performance of a security or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not ensure a profit or protect against loss. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. There is always the potential of losing money when you invest in securities or other financial products. Investors should consider their investment objectives and risks carefully before investing. The price of a given security may increase or decrease based on market conditions and clients may lose money, including their original investment and principal. The information provided does not take into account the specific objectives, financial situation, or particular needs of any specific person. This is not an offer, solicitation of an offer, or advice to buy or sell securities, or any other product offered by Titan or any third party. Please visit www.titan.com/legal for important disclosures. 

The content provided in this email is for informational purposes only and is not investment or financial advice, tax or legal advice, an offer, solicitation of an offer, or advice to buy or sell securities or investment products. Please visit www.titan.com/legal for important disclosures.