Updates, Tips, & Finance News

Hi there—here is this week's update!

TL;DR (Too Long; Didn’t Read)

-We released performance figures this week. Scroll to the bottom if you missed the email.

-Poor economic data continues to get worse. The markets and economic data have diverged to paint polarizing pictures.

-We believe that Round portfolios are extraordinarily well-positioned to weather another correction.

-Adding more money to your Round account will help take advantage of lower prices when the market drops.

Market update


The valuations of risk assets have continued to remain extremely high. Blindly buying into risk assets in the face of these red flags is irresponsible. The S&P 500’s price to earnings is at a nearly twenty-year high, which is around the highest valuation for stocks since the dot com bubble.

Retail investors making bets

A retail investor is an individual who invests for themselves—not a fund manager or institutional investor.

Retail investors are incredibly bullish right now. “Last week, the smallest of options traders (those who trade 10 contracts or fewer at a time) positioned themselves to bet on a rally, buying bullish calls and selling bearish puts at a record pace,” according to Sundial Capital Research.

Why does this matter? Small individual investors have historically had the most limited knowledge and understanding of the financial markets. Hindsight is 20/20, but we’ve seen retail investors rushing into markets—buying high and selling low—countless times throughout history. We saw this happen in the peak of the 1929 stock boom, the dot-com bubble, and the crypto bubble in 2018.

V-shaped recovery

A “v-shaped” recovery is not likely, and it may take years to recover the lost economic output from the ongoing pandemic. The output from the first half of 2020 alone is likely to contract more than the first two years of the Great Depression combined, yet, the stock market is only down about -12% from its all-time high back in February of this year. The economy is far more damaged than just -12%.

The Fed

“Stocks and bonds are selling at prices they wouldn’t sell at if the Fed were not the dominant [buying] force…Can the Fed keep it up forever?” – Howard Marks, Oaktree Capital

On May 12th, the Fed began its open market operations buying corporate bond ETF’s with a total spending power of $750 billion. Companies looked to capitalize on this policy and have issued over $1 trillion of investment grade-debt this year alone, compared to all of 2019 when companies issued $1.14 trillion of investment-grade debt. We are seeing that much of this debt was raised to weather the economic storm we are currently facing.

Real estate

Due to economic conditions, new housing construction just hit an all-time low. New US housing construction fell 30.2% from March to April. This has widely affected both the real estate and construction industries. One of the leading figures in the commercial real estate market, Tom Barrack of Colony Capital, has called for immediate and necessary action to stave off a crisis in the industry, which he says could lead to an impact greater than the Great Depression.


The unemployment rate is currently at about 17%. The peak unemployment rate of the financial crisis was 10%, while the great depression witnessed 25% unemployment. Some say that such high unemployment is only temporary because of the lockdown; however, researchers are expecting 42% of recent layoffs to result in permanent job losses.


The Leading Economic Index (LEI) declined 4.4% for April, after a historic decline in March. The LEI is widely viewed as an indicator of future expectations of the economy. In their report, they shared that erosion has been very widespread, except for stock prices. The sharp decline in the LEI suggest that an imminent re-opening of some sectors does not imply a fast rebound for the economy at large.

Summary & Round Portfolio Positioning

As presented above, the economy is in a world of hurt. The current rebound in stocks now ranks as the third fastest bear market rally in history. The graphic below shows historical market rallies that happened in the middle of major economic collapses.

Given this continued disconnect, Round portfolios across the risk spectrum have remained risk-off. We believe that we are very well-positioned to weather what we expect to be another correction looming on the horizon.

We maintain our position that now is a great time to be adding funds to your Round account, as we will be looking to take advantage of lower valuations in risk assets as their prices correct.

We hope you're able to enjoy the long weekend (markets are closed Monday), and we'll see you next week!

The Round Team

2019 - Q1 2020 Performance


Round's actively managed approach led to significant outperformance for clients in our aggressive strategy, even through one of the most signifant market downturns.

Disclosures: Round's most aggressive strategy is referring to the Round 75% Core, 20% Market, 5% Cash Portfolio Composite. December 31, 2018 through March 31, 2020. 1) Round Investments LLC, dba Round, is an SEC registered investment advisor. Securities offered through Apex Clearing Corporation, Member FINRA, SIPC. Registration does not imply a certain level of skill or training. Round’s clients consist of separately managed accounts. Policies for valuing portfolios and calculating performance are available upon request. 2) The Round 75% Core, 20% Market, 5% Cash Portfolio Composite (the “Composite”) includes all separately managed wrap fee accounts invested in Round’s most aggressive portfolio allocation (75% Core, 20% Market, 5% Cash Portfolio) from market close of December 31, 2018 to market close of March 31, 2020. The majority of Round’s assets under management are invested in the 75% Core, 20% Market, 5% Cash Portfolio. Refer to Round’s Form ADV Part 2 for more information about the Core, Market, Cash strategies and related risks. 3) Performance returns are presented net of the Round Program Fee defined below. Portfolio returns are calculated daily, reflecting a time weighted return method. Portfolio returns reflect the reinvestment of dividends, capital gain distributions and other income. The Composite returns are cumulative and not annualized. 4) The Composite returns are calculated by averaging the time-weighted returns of Round clients in Round’s 75% Core, 20% Market, 5% Cash Portfolio. 5) The accounts included in the Composite are enrolled in Round’s digital only “Round Premium,” which is subject to an annual wrap fee for brokerage, custodial, investment advisory and other related services (the “Program Fee”), prorated and charged monthly in arrears based on the monthly ending balance in the account. The Program Fee from January 1, 2018 to March 31, 2019 was 1%. As of April 1, 2019, the Program Fee is 0.50%. As of June 1, 2019, Round instituted a policy that if, at the end of a month, an account’s time-weighted return is negative, Round will waive the Program Fee for that month (“No Fee Policy”). All Round accounts in the Composite had a negative time-weighted return for February and March of 2020. In accordance with its No Fee Policy, Round waived the Program Fee for all Round accounts in the Composite for February and March of 2020. Had the Program Fee been charged, reflected performance would have been lower. If one were to upgrade to “Round Private Client” which introduces access to live advisors, a higher asset-based advisory fee schedule may apply, which would decrease reflected performance. Full details about fees and how they are charged can be obtained by emailing team@investround.com or by visiting https://intercom.help/investround/en/articles/2990250-fees. 6) Clients that have requested an account closure or do not have an account in good standing have been excluded from the Composite. Results from these excluded accounts may differ substantially from the Composite. 7) The Composite was calculated internally by Round and has not been compiled, reviewed, or audited by an independent third party. 8) For illustrative purposes, the Round Composite is compared to the performance of the following digital advice products, the strategies of which are described by initial target portfolio allocations to equities, fixed income, miscellaneous, and cash (“Illustrative Strategies”). Betterment Digital IRA (87% | 13% | 0% | 0%), Personal Capital IRA (91% | 3% | 2% | 4%), Merrill Edge Guided Investing IRA (89%| 9% | 0% |2%), Morgan Stanley IRA (79% | 15% | 0% | 6%), Wells Fargo IRA (91% | 7%| 0% | 2%), E*Trade IRA (98% | 0% | 0% | 2%), Schwab Intelligent Portfolios IRA (94% | 0% | 0% | 7%). There are meaningful differences between the Round Composite and the Illustrative Strategies that should be considered when comparing performance. For example, Round measures risk by the level of portfolio allocation towards Round’s Core Strategy. Round’s Core Strategy’s objective is to maximize alpha through dynamic portfolio management. The risky nature of this strategy is due to its susceptibility to poor portfolio management decision making. The Illustrative Strategies measure risk by the level of asset allocation to equity. In addition, the volatility of the Round Composite may be greater or less than that of the Illustrative Strategies. Moreover, the performance of the Round Composite may vary from that of the Illustrative Strategies due to the performance of underlying stock exposures in the Round Composite but not included in the Illustrative Strategies, or the underlying stock exposures in the Illustrative Strategies but not found within underlying exposures in the Round Composite. Actual performance data for each of the Illustrative Strategies are net of fees and cumulative, not annualized. Performance data was made available by https://www.backendbenchmarking.com/the-robo-report via the Fourth Quarter 2019 The Robo Report™ and First Quarter 2020 The Robo Report™ produced by Backend Benchmarking. The performance data provided was broken up into 2019, and Q1 2020 periods, which were geometrically linked by Round to reflect the time-weighted return method used for the Round Composite over the same time period. Additional information and disclosures regarding the Illustrative Strategies accounts may be found at https://www.backendbenchmarking.com/the-robo-report. 9) The performance presented represents past performance and is not a guarantee of future results. The performance of an individually separately managed account may be different, including as a result of the timing of cash deposits and withdrawals and lack of automatic rebalancing. Performance returns and principal value will fluctuate and may be worth more or less than original cost. Current performance may be lower or higher than the performance data quoted. Data is subject to change on a daily basis. Investing entails risk including the possible loss of principal and there is no assurance that the investment will provide positive performance over any period of time. 10) Refer to Round’s Form ADV Part 2 for more information regarding investment strategies, risks, fees and expenses. 11) The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The information provided does not take into account the specific objectives, financial situation or particular needs of any specific person. Diversification does not ensure a profit or protect against a loss in a declining market. 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. Forecasts or projections of investment outcomes in investment plans are estimates only, based upon numerous assumptions about future capital markets returns and economic factors. As estimates, they are imprecise and hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. The opinions expressed by Round represent the current, good faith views of Round and are provided for limited purposes, are not definitive investment advice and should not be relied upon as such. The stock market is in reference to the S&P 500 index. An index is unmanaged, does not reflect management or trading fees, and one cannot invest directly in an index. Stock market performance is in reference to the SPX Index and was provided by Bloomberg Terminal for the date range 2/19/2020 – 5/22/2020.