Insights Disclosures & Definitions

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IMPORTANT INFORMATION

Analysts and/or strategists of Doxa Capital, LLC hereby certify that their views about the financial markets are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report. Analysts and/or strategists of Doxa Capital, LLC receive compensation based upon various factors, including quality of research, client feedback, competitive factors, and overall firm revenue.

Doxa Capital, LLC does not directly render its investment services to companies covered or recommended by Doxa Research. If such business was engaged, Doxa Research would cease coverage of the company involved.

The views in this report are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. While all material is deemed to be reliable, accuracy and completeness cannot be guaranteed.

Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns. Keep in mind, like all investing, that multi-asset investing does not assure a profit or protect against loss.

Doxa Capital, LLC (herein ‘Doxa’) makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss. Certain of Doxa’s strategies involve advanced investments that can be illiquid and are subject to a substantial risk of loss and are not suitable for many investors. Options are not for everyone. Before engaging in the purchasing or writing of options, investors should understand the nature and extent of their rights and obligations and be aware of the risks involved, including the risks pertaining to the business and financial condition of the issuer and the underlying stock. A secondary market may not exist for these securities. Where an investment is denominated in a currency other than the investor’s currency, changes in rates of exchange may have an adverse effect on the value, price of, or income derived from the investment.

No model or group of models can offer a precise estimate of future returns available from capital markets. We remain cautious that rational analytical techniques cannot predict extremes in financial behavior, such as periods of financial euphoria or investor panic. Our models rest on the assumptions of normal and rational financial behavior. Forecasting models are inherently uncertain, subject to change at any time based on a variety of factors and can be inaccurate. Doxa Capital, LLC believes that the utility of this information is highest in evaluating the relative relationships of various components of a globally diversified portfolio. As such, the models may offer insights into the prudence of over or under weighting those components from time to time or under periods of extreme dislocation. The models are explicitly not intended as market timing signals. Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.

Investment in Global, International or Emerging markets, directly or indirectly, may be significantly affected by political or economic conditions and regulatory requirements in a particular country. Investments in non-U.S. markets, directly or indirectly, can involve risks of currency fluctuation, political and economic instability, different accounting standards and foreign taxation. Such securities may be less liquid and more volatile.

Bond investors should carefully consider risks such as interest rate, credit, default and duration risks. Greater risk, such as increased volatility, limited liquidity, prepayment, non-payment and increased default risk, is inherent in portfolios that invest in high yield (“junk”) bonds or mortgage-backed securities, especially mortgage-backed securities with exposure to subprime mortgages. Generally, when interest rates rise, prices of fixed income securities fall. Interest rates in the United States are at, or near, historic lows, which may increase a Fund’s exposure to risks associated with rising rates. Investment in non-U.S. and emerging market securities, directly or indirectly, is subject to the risk of currency fluctuations and to economic and political risks associated with such foreign countries.

TERMS:

Inflation – The Consumer Price Index (CPI) NSA (non-seasonally adjusted) measures changes in the price level of a market basket of consumer goods and services purchased by households. This indicator value represents the trailing year over year % change in the CPI index as of last month-end.

Yield - The yield of a bond is inverse to its price: as bond prices increase, bond yields fall. For example, assume that an investor purchases a bond with a 10% annual coupon and a par value of $1,000. The yield on this bond would be its par value divided by the interest it pays.

Expected Return - the value of a random variable one could expect if the process of finding the random variable could be repeated an infinite number of times. Formally, it gives the measure of the center of the distribution of the variable.

Unemployment – The Bureau of Labor Statistics measures employment and unemployment of all persons over the age of 15 using two different labor force surveys conducted by the United States Census Bureau (within the United States Department of Commerce)and the Bureau of Labor Statistics (within the United States Department of Labor) that gather employment statistics monthly. The data reported here is seasonally adjusted (SA) to account for seasonal gains in employment leading up to Christmas.

GDP / Economic Expansion – GDP (Gross Domestic Product) measures the total market value of a nation’s output of goods and services during a specific time period. It is usually measured on a quarterly basis. Current GDP is based on the current prices of the period being measured. Nominal GDP growth refers to GDP growth in nominal prices (unadjusted for price changes). Real GDP growth refers to GDP growth adjusted for price changes. Calculating Real GDP growth allows economists to determine if production increased or decreased, regardless of changes in the purchasing power of the currency.

Recession - A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

The S&P 500® Index - is a free-float capitalization-weighted index published since 1957 of the prices of 500 large-cap common stocks actively traded in the United States. The stocks included in the S&P 500® are those of large publicly held companies that trade on either of the two largest American stock market exchanges: the New York Stock Exchange and the NASDAQ.

Bloomberg USD High Yield Corporate Bond Index - a rules-based, market-value-weighted index engineered to measure publicly issued non-investment grade USD fixed-rate, taxable and corporate bonds. To be included in the index, a security must have a minimum par amount of $250 million and have a minimum maturity of 1 year at rebalancing. Emerging market debt is excluded.

Market Volatility (VIX) –CBOE VIX (Chicago Board Options Exchange Volatility Index) measures annualized implied volatility as conveyed by S&P 500 stock index option prices and is quoted in percentage points per annum. For instance, a VIX value of 15 represents an annualized implied volatility of 15% over the next 30 day period. The VIX measures implied volatility, which is a barometer of investor sentiment and market risk.

Aggregate Demand - In macroeconomics, aggregate demand (AD) or domestic final demand (DFD) is the total demand for final goods and services in an economy at a given time. It specifies the amounts of goods and services that will be purchased at all possible price levels.

Aggregate Supply - In economics, aggregate supply (AS) or domestic final supply (DFS) is the total supply of goods and services that firms in a national economy plan on selling during a specific time period. It is the total amount of goods and services that firms are willing and able to sell at a given price level in an economy.

Capital Expenditures (Capex) - A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life extending beyond the taxable year.

Multiple / Price to Earnings Ratio (P/E) - a ratio for valuing a company that measures its current share price relative to its per-share earnings.

Federal Open Market Committee (FOMC) - The branch of the Federal Reserve Board that determines the direction of monetary policy. The FOMC is composed of the board of governors from different Federal Reserve Banks around the country.

Policy Normalization - Specifically, monetary policy normalization refers to steps to raise the federal funds rate and other short-term interest rates to more normal levels and to reduce the size of the Federal Reserve's securities holdings and to return them mostly to Treasury securities, so as to promote the Federal Reserve's statutory mandate set by Congress.

Commodities – a raw material or primary agricultural product that can be bought and sold, such as copper or coffee.

Developed Economy – countries with high gross domestic product (GDP) per capita and industrialization; countries in which the tertiary and quaternary sectors of industry dominate would thus be described as developed.

Emerging Economies - progressing toward becoming more advanced, usually by means of rapid growth and industrialization. These countries experience an expanding role both in the world economy and on the political frontier.

Quantitative Easing - is a type of monetary policy used by central banks to stimulate the economy when standard monetary policy has become ineffective.

Structural - of or relating to the arrangement of and relations between the parts or elements of a complex whole.

Cyclical - occurring in cycles; recurrent.

Profit Margin / Net Margin - the percentage of revenue left after all expenses have been deducted from sales. The measurement reveals the amount of profit that a business can extract from its total sales. The net sales part of the equation is gross sales minus all sales deductions, such as sales allowances.

Market Capitalization - the total money market value of the shares outstanding of a publicly traded company; it is equal to the share price times the number of shares outstanding.

Productivity - the effectiveness of productive effort, especially in industry, as measured in terms of the rate of output per unit of input.

Overnight Rate / Discount Rate - the interest rate that large banks use to borrow and lend from one another in the overnight market.

Monetary Policy - the process by which the monetary authority of a country controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.

Wages – A monetary compensation (or remuneration) paid by an employer to an employee in exchange for work done. Payment may be calculated as a fixed amount for each task completed (a task wage or piece rate), or at an hourly or daily rate, or based on an easily measured quantity of work done.

Non-Farm Payrolls - A statistic researched, recorded and reported by the U.S. Bureau of Labor Statistics intended to represent the total number of paid U.S. workers of any business, excluding the following employees: general government employees, private household employees, employees of nonprofit organizations that provide assistance to individuals, and farm employees. This monthly report also includes estimates on the average work week and the average weekly earnings of all non-farm employees.

MPC – The proportion of an aggregate raise in pay that a consumer spends on the consumption of goods and services, as opposed to saving it. The marginal propensity to consume (MPC) is equal to ΔC / ΔY, where ΔC is change in consumption, and ΔY is change in income. If consumption increases by 80 cents for each additional dollar of income, then MPC is equal to 0.8 / 1 = 0.8.

Monetary Stimulus - an attempt to use monetary or fiscal policy to stimulate the economy by lowering interest rates and/or quantitative easing.

Monetary Base – a part of the money supply which is highly liquid, including notes, coins, and commercial bank deposits.

Carry Trade - A strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. A trader using this strategy attempts to capture the difference between the rates, which can often be substantial, depending on the amount of leverage used.

Loan Supply – the amount of outstanding loans, commercial or personal, that are in effect between an entity(s) and a bank(s).

Margin Loan - A margin loan lets you borrow money to invest and uses your shares or managed funds as security.

Fischer Effect - an economic hypothesis stating that the real interest rate is equal to the nominal rate minus the expected rate of inflation.

Economic Multiplier – an effect that refers to the increase in final income arising from any new injection of spending.

Currency Peg – an exchange regime where a currency's value is fixed against either the value of another single currency, to a basket of other currencies, or to another measure of value.

Foreign Direct Investment (FDI) - a controlling ownership in a business enterprise in one country by an entity based in another country.

Purchasing Power - the value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing power is important because, all else being equal, inflation decreases the amount of goods or services you would be able to purchase.

Capacity Utilization - the extent to which an enterprise or a nation actually uses its installed productive capacity.

Organization of Petroleum Exporting Countries (OPEC) - An organization consisting of the world's major oil-exporting nations. The Organization of Petroleum Exporting Countries (OPEC) was founded in 1960 to coordinate the petroleum policies of its members, and to provide member states with technical and economic aid.

High-Yield Bond - A high paying bond with a lower credit rating than investment-grade corporate bonds, Treasury bonds and municipal bonds.

The Dow Jones Industrial Average - a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.

Russell 2000 Index - An index measuring the performance approximately 2,000 small-cap companies in the Russell 3000 Index, which is made up of 3,000 of the biggest U.S. stocks.

Nikkei 225 - a price-weighted equity index, which consists of 225 stocks in the 1st section of the Tokyo Stock Exchange.

SSE Composite Index (abbreviated Chinese: 证综指) - a stock market index of all stocks (A shares & B shares) that are traded at the Shanghai Stock Exchange.

Hang Seng Index (abbreviated Chinese: 恒生指數) - a free float-adjusted market capitalization-weighted stock market index in Hong Kong.

Corporate profit - also called net income, the amount remaining after all costs, depreciation, interest, taxes, and other expenses have been deducted from total sales.

Liquidity - the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's price.

Market Breadth - a technique used in technical analysis that attempts to gauge the direction of the overall market by analyzing the number of companies advancing relative to the number declining.

West Texas Intermediate (WTI) - also known as Texas light sweet, a grade of crude oil used as a benchmark in oil pricing. This grade is described as light because of its relatively low density, and sweet because of its low sulfur content.

Multiple R - the coefficient of multiple correlation, denoted R, is a scalar that is defined as the Pearson correlation coefficient between the predicted and the actual values of the dependent variable in a linear regression model that includes an intercept.

R-squared (R2) - a statistical measure of how close the data are to the fitted regression line. It is also known as the coefficient of determination, or the coefficient of multiple determination for multiple regression.

ISM Manufacturing Index - monitors employment, production inventories, new orders and supplier deliveries.

Cyclically Adjusted Price-to-Earnings Ratio (CAPE) – also known as Shiller P/E, or P/E 10 ratio, a valuation measure usually applied to the US S&P 500 equity market.

Intrinsic value - refers to the value of a company, stock, currency or product determined through fundamental analysis without reference to its market value.

Trendline - line indicating the general course or tendency of something, e.g., a geographical feature or a set of points on a graph.

Generally Accepted Accounting Principles (GAAP) - a framework of accounting standards, rules and procedures defined by the professional accounting industry, which has been adopted by nearly all publicly traded U.S. companies.

PMI Index - based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.

PBoC – People’s Bank of China, the central bank of the People’s Republic of China

Begger-thy-Neighbor - an economic policy through which one country attempts to remedy its economic problems by means that tend to worsen the economic problems of other countries.

C + G + I + NX – this common equation refers to the composition of GDP. C = consumer spending, G= government spending, I = domestic investment, and NX = total imports less total exports.

Populism - a belief in the power of regular people, and in their right to have control over their government rather than a small group of political insiders or a wealthy elite.

Stagnation - a prolonged period of little or no growth in an economy. Economic growth of less than 2 to 3% annually is considered stagnation, and it is highlighted by periods of high unemployment and involuntary part-time employment.

Neutrality Acts - laws passed in 1935, 1936, 1937, and 1939 to limit U.S. involvement in future wars. They were based on the widespread disillusionment with World War I in the early 1930s and the belief that the United States had been drawn into the war through loans and trade with the Allies.

Potential Recession Causes:

    • High-interest rates. When rates rise, they limit liquidity, or the amount of money available to invest. The biggest culprit was the Federal Reserve, which often raised interest rates to protect the value of the dollar. The Fed raised rates to battlestagflation, causing the 1980 recession. It did the same thing to protect the dollar/gold relationship, worsening the Great Depression.
    • Astock market crash. The sudden loss of confidence in investing can create a subsequent bear market, draining capital out of businesses.
    • Falling housing prices and sales. As homeowners lose equity, it forces a cutback in spending as they can no longer take out second mortgages. Over time, it will cause foreclosures. This was the initial trigger that set off the Great Recession, but for different reasons. Banks that lost money on the complicated derivatives based on underlying home values.
    • A slowdown in manufacturing orders. Orders for durable goods started falling in October 2006, before the 2008 recession actually hit.
    • Wage-price controls. Fortunately, this only happened once, when President Nixon kept prices too high, cutting demand. Employers laid off workers because they weren't allowed to lower wages.
    • Slowdown after a war. This caused both the 1953 recession, following the Korean War, and the 1945 recession, following World War II.
    • Credit crunch. This occurred when Bear Stearns announced losses thanks to the collapse of two hedge funds it owned. The funds were heavily invested in collateralized debt obligations.  When Moody's downgraded its debt, it, banks who were in a similar overinvested condition panicked. They stopped lending to each other, creating a massive credit crunch.
    • Asset bubbles: This is when the prices of internet companies, stocks or houses become inflated beyond their sustainable value. The bubble itself sets the stage for a recession to occur when it bursts.
    • Deflation, which encourages people to wait until prices are lower.
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