While the bull market in U.S. equities is capturing plenty of headlines, perhaps less well understood is the strength taking place in International equities. Dorsey Wright’s main asset allocation tool, Dynamic Asset Level Investing (DALI), ranks six asset classes based on their relative strength. As shown below, U.S. equities remain firmly in first place, but International equities currently finds itself in the number two spot.
The whole point of a tool like DALI is to be able to identify asset classes that are in favor as well as asset classes that are out of favor so an investor’s portfolio can be positioned to capitalize on those trends.
Source: Dorsey Wright, 3/2/17
The chart below shows the historical rank of International equities in DALI. As shown below, it wasn’t all that long ago that International equities was ranked dead last. Over the last year, this asset class has made a powerful move higher.
Source: Dorsey Wright, 3/2/17, based on monthly tally ranks
Chances are good that your clients have a healthy allocation to U.S. equities, but are they currently light on exposure to International equities? If so, we have a suggestion for how you go about getting that exposure for your clients.
On March 31, 2006 we launched our Systematic Relative Strength International Portfolio that was designed to start with an investment universe of ADRs from developed and emerging markets, small, mid, and large cap stocks and then to evaluate that universe based on our relative strength model. Our model seeks to overweight strong sectors and to underweight weak sectors. It also makes its buy and sell decisions by relative strength rank. Stocks are bought from the top quartile of our ranks and they are sold when they fall out of the top half of our ranks. It is a disciplined trend following approach to international equity exposure. The results have been something that we have been very proud of. See below for details:
As of 2/28/17.
This portfolio is available on a large and growing number of SMA and UMA platforms. To receive the fact sheet for this portfolio, please call 626-535-0630 or e-mail firstname.lastname@example.org.
The performance represented in this brochure is based on monthly performance of the Systematic Relative Strength International Model. Net performance shown is total return net of management fees, commissions, and expenses for all Dorsey, Wright & Associates managed accounts, managed for each complete quarter for each objective, regardless of levels of fixed income and cash in each account. The advisory fees are described in Part 2A of the adviser’s Form ADV. The starting values on 3/31/2006 are assigned an arbitrary value of 100 and statement portfolios are revalued on a trade date basis on the last day of each quarter. All returns since inception of actual Accounts are compared against the NASDAQ Global ex US Index. The NASDAQ Global ex US Index Total Return Index is a stock market index that is designed to measure the equity market performance of global markets outside of the United States and is maintained by Nasdaq. A list of all holdings over the past 12 months is available upon request. The performance information is based on data supplied by the Manager or from statistical services, reports, or other sources which the Manager believes are reliable. There are risks inherent in international investments, which may make such investments unsuitable for certain clients. These include, for example, economic, political, currency exchange, rate fluctuations, and limited availability of information on international securities. Past performance does not guarantee future results. In all securities trading, there is a potential for loss as well as profit. It should not be assumed that recommendations made in the future will be profitable or will equal the performance as shown. Investors should have long-term financial objectives when working with Dorsey, Wright & Associates.