It seems everybody is stumbling around in the darkness, trying to find the light at the end of the tunnel.

A friend of mine was lamenting about the poor market performance. He mentioned that he threw some money into a bond ETF, and even that was losing him money.

“Aren’t bonds supposed to go up when stocks go down?” he asked me.

Now, I don’t dabble too much in the bond market, but his comment — and question — intrigued me.

After all, this isn’t a fella who is nearing retirement and thus should be investing in bonds. I have nothing against bonds, but all the financial models (and advisors) would suggest that someone his age should be a little more aggressive with his money (i.e., not the bond market).

It also revealed to me just how desperate he (and I’d assume many others) are to find a “safe” investment that doesn’t lose money. After a little research, it was also telling of just how crazy this market environment is. For everyone.

I found this little factoid from Charlie Bilello, founder of Compound Capital Advisors, regarding the bond market.

“The US Bond market is on pace for its worst year in history with a loss of 15.2%, which is 5x larger than the previous worst year back in 1994 (-2.9%).”

As you can see from the table, the bond market has historically provided investors with stable annual returns. Over the last 40-plus years, it has had only four down years before this year. The biggest loss was in 1994, at just -2.9%.

The bond market either has to stage an incredible rally in this final quarter, or it will be the worst year in decades by a long stretch.

For investors, it is clear that there is nowhere to hide.

Even The “Pros” Are Underperforming

Of course, misery loves company, so I will also throw out there that even the top money managers are struggling this year.

The HFRU Hedge Fund Composite Index tracks hedge fund performance and has shed over 7% year-to-date. Hedge Funds devoted solely to equities are down over 15% this year.

Ross Turner’s Pelham Capital is down over 32% on the year. Lone Pine Capital has seen assets slump 42%, while Chase Coleman’s Tiger Global has lost almost 52% this year.

This isn’t a one-off year for the world’s professional investors either… According to the most recent S&P Indices Versus Active (“SPIVA”) scorecard, nearly 80% of fund managers underperformed the market last year. That’s the 12th year in a row that hedge fund managers trailed the market.

It’s hard to justify paying these money managers 2% of assets per year plus 20% of profits for that kind of lackadaisical performance.

One bright spot has been Ken Griffin’s Citadel Hedge Fund, which has seen all four of its funds generate double-digit returns. Its flagship Wellington multi-strategy fund is reportedly up 29% on the year.

The point is that it’s tough out there, no matter where you turn. Over at my premium Maximum Profit service, for example, we’ve plucked some winners here and there, mainly from the energy sector. For instance, this year, we booked gains of 20%, 19%, 16%, and 11% from some energy names.

But overall, we’ve booked more losers than winners. While that might be unsettling for most investors, it doesn’t matter what your win/loss ratio is as long as you keep losses small. And because we try to keep our losses small, our average trade this year has lost us -4.1%.

Considering the broader landscape, that’s not terrible. The S&P 500 is down 23% this year, for comparison. But it’s nowhere where I would like to be.

Closing Thoughts

This has been the toughest year to trade in recent memory. That’s one of the reasons why we’ve remained in cash for much of the year. I don’t see that changing much any time soon. But as difficult as frustrating as this year has been as a trader, I know that having a proven system has kept us from losing much, much more.

We still have a couple of months left to try to rack up a few more winners. But I won’t be reckless trying to go against the prevailing winds of the market, and you shouldn’t either.

Instead, I will be selective with our trades and look for singles and doubles — like I’ve been preaching about for the past month.

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