Two weeks ago, I discussed the challenges of being Hedged on a Big Up Day and made this observation…

“It’s tough to miss out on a rally, but the merits of hedging never show up on a big up day. Risk management approaches are for markets that actually reflect risk and that wasn’t the case yesterday.”

This week, the markets started to deal with risk and being hedged to the downside was critical for preserving gains. As we entered this week, the HEDGEfolios universe of 3,690 stocks had 64% DOWN signals. At the open on Monday, July 23rd HEDGEfolios had a year-to-date gain of 11.36% vs. 8.18% for the S&P 500. During the carnage on Thursday which resulted in a market decline of -2.2%, HEDGEfolios actually increased by 30 bps. For the week, HEDGEfolios improved by 3.2% and is showing a YTD gain of 13.75% vs. 2.9% for the S&P 500.