Advisors Warm to Allocation ETFs

April 1, 2016

Nice article by Jackie Noblett of Ignites, highlighting the successful trend toward wrapping strategies in an ETF—a trend which Dorsey Wright is leading.

While funds of funds have their niche in the mutual fund marketplace, ETFs allocating to other exchange-traded products have struggled to catch on with advisors who pride themselves in their ability to build low-cost and efficient ETF portfolios.

But ETF sponsors say advisors are starting to pay more attention to ETFs of ETFs with embedded asset allocation strategies for parts of their practices where the efficiencies of buying a single stock outweigh additional management fees.

“Advisors could go out and do a similar thing [to the ETF] but then they are incurring turnover costs, commissions and may not be able to track the strategy as well, so the management fee overlay [of an ETF of ETFs] is very reasonable,” says Jeff Beeson, product development manager at Invesco PowerShares.

PowerShares is among the firms looking to tap into demand for products with prepackaged allocations. Both it and First Trust launched ETFs this month that invest in a portfolio of their own products based on research methodologies developed by Dorsey, Wright & Associates.

State Street Global Advisors, meanwhile, has filed registration statements to add the SPDR SSGA Flexible Allocation ETF and SPDR SSGA U.S. Sector Rotation ETF to its line of actively managed asset allocation ETFs of ETFs launched in 2012.

Most of these products remain relatively small compared with funds of mutual funds and separately managed accounts composed primarily or exclusively of ETFs.

iShares launched a range of asset allocation ETFs in 2008, and rebranded them under its core series.

The four funds totaled just under $1.8 billion at the end of February, according to Morningstar. State Street launched the actively managed SPDR SSGA Global Allocation ETF, SPDR SSGA Income Allocation ETF and SPDR SSGA Multi-Asset Real Return ETF in 2012, but combined those products hold about $237 million in assets.

A handful of such products have had greater success in gathering assets, however. The $3.4 billion Dorsey Wright Focus 5 Fund is among the largest asset allocation ETFs of ETFs, and critical to its success is the “intellectual capital and following” that comes with partnership with the Richmond, Va.-based research and model shop, says Ryan Issakainen, senior VP at First Trust.

First Trust has worked with Dorsey on building other models that allocate among the Wheaton, Ill.-based sponsor’s ETFs, but offering the strategy in a stand-alone ETF provides another way for advisors to access the research and models.

“Dorsey Wright has demonstrated expertise in helping advisors use ETFs in portfolio construction, either in sector rotation or some other kind of model, and there were already a number of financial advisors that had significant buy-in to the strategies,” Issakainen says.

Similarly, PowerShares sees significant value in the Dorsey name. In the case of the DWA Multi-Asset Income Portfolio, it is the first time the research shop has put together a product using a multi-asset income-focused model, Beeson notes. The firm is positioning the product as a way for advisors to enhance income generation without having to “reach” into asset classes they may be unfamiliar with, such as master limited partnerships, he adds.

Advisors also benefit from the efficiencies that come with the fund-of-funds model, particularly for more tactical strategies, sponsors and analysts say. Investors often incur trade commissions and bid-ask spread costs in buying and selling ETFs on an exchange, which can add up when tracking a portfolio of many ETFs that rebalance frequently. Those trades can also have tax consequences, but an ETF can use in-kind creation and redemption to reduce the capital gains hit.

While some ETF-using advisors believe part of their value to clients is in evaluating the broad array of ETFs and using them as building blocks for custom portfolios, there are a growing number of investors new to ETFs who are looking for “simple solutions” that increasingly include ETFs of ETFs, says Todd Rosenbluth, director of mutual fund and ETF research at S&P Capital IQ. “They are gaining attention because they are doing the work for the investor or advisor in terms of sorting through the universe of ETFs based on whatever characteristics or outcome they are looking for.”

By comparison, more than $73 billion was held in ETF managed portfolios tracked by Morningstar at the end of 2015. But the ETF managed account business has shrunk nearly 30% from its peak of $103 billion at the beginning of 2014, in part due to poor performance and in part because of reverberations from the collapse of F-Squared Investments and management turnover at Windhaven — two of the biggest ETF strategists.

ETF sponsors have spent years forging close ties with this market, but also supplementing their efforts to help advisors put together ETF asset allocation strategies with paper models and individual ETFs. “We see utility in a lot of different mechanisms for asset allocation,” says Dave Mazza, head of research for SPDR ETFs and SSgA Funds.

“There’s going to be a group of clients out there that are not going to be interested in a one-stop-shopping solution for their client portfolios. But that doesn’t turn them off from being engaged with the [asset allocation] products,” either as a tool for smaller accounts or within a sleeve of a portfolio that mixes various asset allocation strategy funds with an advisor’s choice of ETFs or other products to serve as core holdings, he says.

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What To Make Of International?

March 28, 2016

Dorsey Wright’s main asset allocation tool, Dynamic Asset Level Investing (DALI), currently has International Equities ranked dead last from a relative strength perspective:

dali_intl

As of 3/23/16

Another way to get a sense for how poor International equities have done is to look at the PnF chart of MSCI EAFE (EFA):

efa

As of 3/23/16

This ETF remains well below its early 2014 highs, even with the rally of the last couple of weeks.

From an asset allocation perspective, this type of weak performance from an asset class can cause an investor to question how International equity exposure should be handled.  Should International equity be reduced?  eliminated? actively managed?

A strong argument for the latter (actively managed) would be our Systematic RS International Portfolio.  While International equities have been weak for some time, our Systematic RS International portfolio has been able to create significant separation from its benchmark, as shown below:

srs intl performance

See performance disclosures below (1).  As of 2/29/16.  Inception 3/31/2006.

As shown above, Systematic RS International has performed well versus the MSCI EAFE over the time periods shown (YTD, 1 year, 3 years, 5 years, and since inception).

One of the keys to this performance is that Systematic RS International is a fairly concentrated portfolio of ADRs.  Our starting universe includes about 500 small, mid, and large cap ADRs from both developed and emerging international market.  From that broad investment universe of ADRs, our model narrows it down to 30-40 stocks that will go into the portfolio.  We rank that universe of stocks by relative strength, buy stocks out of the top quartile of our ranks, and sell them when they fall out of the top half of our ranks.

dispersion

Source: Dorsey Wright. Performance over period 3/22/2013 – 3/22/2016.  Performance is price only, not inclusive of dividends or transaction costs.

When you look at the cumulative 3-year performance for the stocks in the investment universe for our Systematic RS International portfolio, you will notice that the returns range from -100% to 775%.  A large percentage of the stocks in the investment universe performed quite poorly over this period of time.  However, you’ll also notice that a sub-set of the securities performed quite well.  In fact, there were over 50 stocks in this investment universe that were up over 50 percent over this 3-year period of time.  Certainly a relative strength strategy does NOT guarantee that you’ll capture all those winners.  However, it has the potential to increase the odds that you’ll capture a bunch of them.  Also, what you don’t own is every bit as important as what you do own.  Seeking to avoid the losers can have a meaningful impact on returns as well.

When an asset class is out of favor, investors have some choices to make.  Should they reduce exposure, eliminate exposure, or actively manage that exposure.  We believe that our Systematic RS International portfolio is a good argument for the latter.

If you would like to see the Systematic RS International portfolio added to a UMA platform at your firm, please have your managed accounts department contact Andy Hyer at andy@dorseywright.com or 626-535-0630.

(1)The performance represented in this article 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 MSCI EAFE Total Return Index.  The MSCI EAFE Total Return Index is a stock market index that is designed to measure the equity market performance of developed markets outside of the United States and Canada and is maintained by MSCI Barra.  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.

 

 

 

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Weekly RS Recap

March 28, 2016

The table below shows the performance of a universe of mid and large cap U.S. equities, broken down by relative strength decile and quartile and then compared to the universe return.  Those at the top of the ranks are those stocks which have the best intermediate-term relative strength.  Relative strength strategies buy securities that have strong intermediate-term relative strength and hold them as long as they remain strong.

Last week’s performance (3/21/16 – 3/24/16) is as follows:

ranks

RS leaders outperformed the RS laggards for the first week in a while last week.  Energy names pulled back particularly sharply last week.

This example is presented for illustrative purposes only and does not represent a past or present recommendation.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  The performance above is based on pure price returns, not inclusive of dividends, fees, or other expenses.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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Sector Performance

March 24, 2016

The table below shows performance of US sectors over the trailing 12, 6, and 1 month(s).  Performance updated through 3/23/16.

sector

The performance above is based on pure price returns, not inclusive of dividends, fees, or other expenses.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.  Source: iShares

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Relative Strength Spread

March 22, 2016

The chart below is the spread between the relative strength leaders and relative strength laggards (top quartile of stocks in our ranks divided by the bottom quartile of stocks in our ranks; universe of U.S. mid and large cap stocks).  When the chart is rising, relative strength leaders are performing better than relative strength laggards.    As of 3/21/16:

spread

The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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Crowdsourcing Investment Decisions

March 21, 2016

crowdsourcing

When one of our clients–a financial advisor–recently presented a relative strength strategy to one of their clients, the client’s response was enlightening.  “So, relative strength investing is basically like crowdsourcing, right?”  As the advisor thought about it, the similarities were striking.

Crowdsourcing, a business term coined in 2006, continues to gain traction as a way to obtain desired ideas or services by soliciting contributions from large groups of people rather than by a smaller group of employees.  From Wikipedia, to genealogy research, to KickStarter and beyond, people and institutions are becoming aware of the benefits of engaging the masses.  Take Wikipedia as an example of the benefits of crowdsourcing.  Encyclopedias aimed to convey the accumulated knowledge of experts on a broad range of subjects.  They were a great resource for sure, but quickly became outdated and were often limited in scope.  Enter Wikipedia, launched in 2001.  In contrast to the experts that were engaged to compile the information for encyclopedias, Wikipedia, at least originally, was open to anyone to create articles on any topic (now only registered users can make contributions).  Obviously, many of those contributors to Wikipedia were far from experts on the topic that they were writing about.  However, errors were relatively quickly corrected.  Today, Wikipedia has over 38 million articles in over 250 languages—massively larger than any set of encyclopedias.  Wikipedia is a giant leap forward, and is based on the “wisdom of the crowds.”  The masses over a relatively smaller group of experts.

It is probably obvious why this person made the connection between crowdsourcing and relative strength investing.  Relative strength calculations are derived from prices of securities.  Those prices are simply the equilibrium point of aggregate supply and demand activity in the market.  In a very real sense, prices include the market activity of every market participant in that security.  This stands in stark contrast to typical investment management firm that has an investment committee comprised of a team of portfolio managers and analysts.  This sample investment management firm may see it as their objective to identify securities that they deem to be worth more than its current market price.  In other words, their objective is to identify opportunities where the market is wrong and they are right.  They are relying on a panel of experts whereas a relative strength approach engages the masses.  A relative strength approach to investing doesn’t “argue” with the current market price.  It simply accepts it for what it is and then sorts a universe of securities by their momentum versus a broad market benchmark or versus the momentum of its peers.

Why limit yourself when making buy and sell decisions to a small group of people, even if those people are “experts,” when you can benefit from the wisdom of the crowd?

The relative strength strategy is NOT a guarantee.  There may be times when all investments are unfavorable and depreciate in value.  Image source: www.blog.sermo.com

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Weekly RS Recap

March 21, 2016

The table below shows the performance of a universe of mid and large cap U.S. equities, broken down by relative strength decile and then compared to the universe return.  Those at the top of the ranks are those stocks which have the best intermediate-term relative strength.  Relative strength strategies buy securities that have strong intermediate-term relative strength and hold them as long as they remain strong.

Last week’s performance (3/14/16 – 3/18/16) is as follows:

ranks

This example is presented for illustrative purposes only and does not represent a past or present recommendation.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  The performance above is based on pure price returns, not inclusive of dividends, fees, or other expenses.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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GOLD GETS ITS SHINE BACK

March 18, 2016

GOLD GETS ITS SHINE BACK

By Efram Slen / Product Development Manager, Nasdaq Global Information Services

In light of the market volatility over the first two months of 2016, there have been some real winners as of late. Gold is one of them. In the month of February, gold stocks, as represented by the PHLX Gold/Silver Sector Index were up north of 39%. During that same period, the price of Gold increased from $1,116/oz to $1,234/oz, which is more than a 10.5% return. It is not surprising and highly natural to see investors flock to the asset that is seen as an alternative to cash in highly volatile markets.

Beyond physical ownership, there are many ways to gain exposure to the gold market through the use of equities, futures and options, each of which have been assembled and delivered to investors through indexes.

Equities-Based Gold Indexes

Equities-based gold indexes typically include companies that are involved in the mining or processing of gold. For example, the Nasdaq OMX Global Gold & Precious Metals Index (Ticker: QGLD) is designed to track the performance of the largest and most liquid companies engaged in the gold, silver, and other precious metals mining industries. This index had 47 securities as of February 29, 2016, the largest of which were Barrick Gold Corp, Newmont Mining Corp, and Newmont Mining Corp. Also, theNasdaq Global Index family offers ICB subsector indexes, one of which is based on the subsector Gold Mining in the U.S. The Nasdaq U.S. Benchmark Gold Mining Index (Ticker: NQUSB1777) had just 3 securities as of February 29, 2016. Further, the PHLX Gold/Silver Sector Index (Ticker: XAU) is a specialized index that tracks 30 securities that are involved in gold and silver mining. Launched in 1979, it is among the first sector indexes to be focused on this market. The previous month’s performance of the PHLX Gold/Silver Sector Index ranks among one of the strongest performing months in history. Over the last 30 years, the performance in February 2016 ranks second, only outpaced by a 53.39% monthly gain in September of 1998.

graph 1

The one-year index performance for these indexes, along with the spot price of gold, is shown in Figure 1.

 

FIGURE 1: EQUITY-BASED GOLD INDEXES

figure2

 

Futures-Based Gold Indexes

The Nasdaq Commodity Index incorporates 32 different futures contracts listed in the U.S. or U.K. The Nasdaq Commodity Gold Index is based on gold futures contracts traded on the COMEX and rolls from one contract to another based on a predetermined schedule. This index very closely and consistently tracks the price of gold over time, as shown in Figure 2.

FIGURE 2: FUTURES-BASED GOLD INDEXES

fig3

 

Options-Based Gold Indexes

ETFs have become a very popular vehicle for gaining exposure to gold. To mitigate some of the risk associated with that exposure, the Credit Suisse Nasdaq Gold FLOWS 103 Total Return Index (Ticker: QGLDITR) was designed to track a portfolio consisting of a long position in SPDR Gold Shares (Ticker: GLD), which is the largest and most liquid of the gold ETFs, and a monthly rolling short position in call options against that same ETF. This indexed “buy-write” approach typically results in lower volatility than GLD itself, and converts some of the option premium into a payout stream. Figure 3 illustrates the downside protection afforded by the index against the price of gold.

ETFs have become a very popular vehicle for gaining exposure to gold. To mitigate some of the risk associated with that exposure, the Credit Suisse Nasdaq Gold FLOWS 103 Total Return Index (Ticker: QGLDITR) was designed to track a portfolio consisting of a long position in SPDR Gold Shares (Ticker: GLD), which is the largest and most liquid of the gold ETFs, and a monthly rolling short position in call options against that same ETF. This indexed “buy-write” approach typically results in lower volatility than GLD itself, and converts some of the option premium into a payout stream. Figure 3 illustrates the downside protection afforded by the index against the price of gold.

FIGURE 3: OPTIONS-BASED GOLD INDEXES

fig3

For more information, please click here and a member of our team will contact you directly.

 

Source: Nasdaq Global Indexes Research. Bloomberg. FactSet.

Nasdaq® is a registered trademark of Nasdaq, Inc. The information contained above is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice, either on behalf of a particular security or an overall investment strategy. Neither Nasdaq, Inc. nor any of its affiliates makes any recommendation to buy or sell any security or any representation about the financial condition of any company. Statements regarding Nasdaq-listed companies or Nasdaq proprietary indexes are not guarantees of future performance. Actual results may differ materially from those expressed or implied. Past performance is not indicative of future results. Investors should undertake their own due diligence and carefully evaluate companies before investing. ADVICE FROM A SECURITIES PROFESSIONAL IS STRONGLY ADVISED.

 

 

 

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Thinking Tactically About Income

March 16, 2016

Scott Eldredge, Director of Fixed Income and Product Strategy at PowerShares, discusses a compelling new option for accessing multiple income strategies in one portfolio (DWIN):

For fixed income investors, we’re not in Kansas anymore. There is a witch’s brew of trends working against fixed income investors – including an economy mired in the weakest recovery since World War II, negative interest rates in Europe, the Federal Reserve having targeted 0% interest rates for seven consecutive years, quantitative easing, and the explosion of the Fed’s balance sheet – with no clear path for unwinding. These trends sow confusion, stress and uncertainty for investors struggling to construct a portfolio that can generate sufficient income.

A dearth of yield opportunities in a low interest rate environment

Given today’s low interest rates, fixed income investors clinging to a buy-and-hold mentality are hard-pressed to find yield opportunities – particularly those with aggregate bond allocations. This is because the aggregate bond universe, which has traditionally comprised a broad cross-section of investment grade securities, now looks strikingly similar to a US Treasury portfolio.

As the mortgage agencies like Fannie Mae and Freddie Mac have come under federal conservatorship, markets are pricing in little difference between agency risk and US Treasury risk. This has meant increasingly lower income for investors. How many of us could live off of a retirement income of around 2%? Well, that’s what the Barclays US Aggregate Bond Index currently has to offer.1

Pursuing income can mean taking on more risk

In a quest for higher income, many investors have taken on additional risk in the form of master limited partnerships (MLPs), high yield bonds and real estate investment trusts (REITs). These non-traditional sources of income may offer greater yields than aggregate bond portfolios, but can leave investors vulnerable to shifting market momentum – underscoring the need for credit diversification. By diversifying a non-aggregate income allocation across a broad range of investments with disparate drivers of return, investors can potentially enhance performance, while diluting the impact of market volatility.

So how does one do that? Through a “set it and forget it” allocation to a basket of income solutions with low correlation? Or is there an opportunity to be more tactical with income investing? The answer may lie in one’s interpretation of the following chart, which maps total returns by asset class over the past 10 calendar years:

This year’s winners can be next year’s losers: A decade of income performance (%)

ELDRIDGE-BLOG-0310_chart

Source: Bloomberg L.P., Barclays Capital, BofA Merrill Lynch as of Dec. 31, 2015. Data is from Dec. 31, 2006 through Dec. 31, 2015, and reflects calendar year performance. Past performance is no guarantee of future results. An investor cannot invest directly in an index. Agg. bonds are represented by Barclays US Aggregate Bond Treasury Index, EM bonds by JPM EMBI Global Index, Preferreds by S&P US Preferred Stock Index, US REITS by Wilshire US REIT Index, Bank loans by Credit Suisse Leveraged Loan Index, MLPs by Alerian MLP Index, Municipals by Barclays Municipal Bond Index, High yield corp. by Barclays US Corporate High Yield Index, IG corp. by Barclays US Corporate Investment Grade Index, Dividend growers by S&P 500 Dividend Aristocrats Index and High dividend payers by DJ US Select Dividend Index.

As you can see, what works well one year might not work so well the next. Sometimes a poor performer can jump to the top of the heap in a relatively short amount of time, and vice versa.

A potential solution to a static income allocation

As interest rates cycle and as credit markets fluctuate, there may be an advantage to a strategy that attempts to rotate out of the weakest-performing income segments. The PowerShares DWA Tactical Multi-Asset Income Portfolio (DWIN) is a newly launched smart beta exchange-traded fund (ETF) whose underlying index methodology seeks to do just that. DWIN tracks the Dorsey Wright Multi-Asset Income Index, which invests in other ETFs and rotates between income-oriented market segments based on relative strength and yield criteria. This means investors can access market segments with high current income potential, but also attempt to defend themselves from shifting market whims.

Here’s how it works. DWIN’s underlying index starts by ranking a universe of income-oriented ETFs based on relative strength, with the top 50% of these ranked again by yield. The five top-ranking ETFs are then given equal weighting. Constituents are evaluated monthly and replaced if not among the top-yielding ETFs.

DWIN is a multi-asset portfolio that offers exposure to both the equity and fixed income markets – including investment grade and high yield bonds, fixed-rate preferred shares, dividend paying equities, US Treasuries, MLPs and real estate investment trusts (REITs). The portfolio can even convert to up to 80% US Treasuries in cases of extreme market turbulence – offering the potential for upside participation and downside risk mitigation.2 We believe DWIN is a compelling potential one-ticket rotation solution – tailor made for today’s low interest rate environment.

Learn more about the PowerShares DWA Tactical Multi-Asset Income Portfolio (DWIN).

1 Barclays US Aggregate Bond Index current yield: 2.37%. Source: Bloomberg L.P., March 7, 2016
2 Periodically, US Treasuries will rank highest in relative strength. In these cases, fewer than
five ETFs may be held, and the Treasury allocation can be up to 80% of the fund.

Important information

The Barclays US Aggregate Bond Index is an unmanaged index considered representative of the US investment-grade, fixed-rate bond market.

Barclays US Aggregate Bond Treasury Index tracks the performance of Treasury securities, government agency bonds, mortgage-backed bonds and corporate bonds.

JPM EMBI Global Index is an unmanaged index which tracks the total return of US dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities.

S&P US Preferred Stock Index represents the US preferred stock market.

Wilshire US REIT Index measures US publicly traded Real Estate Investment Trusts (REITs).

Credit Suisse Leveraged Loan Index represents tradable, senior-secured, US dollar-denominated, non-investment grade loans.

Alerian MLP Index is a composite of the 50 most prominent energy master limited partnerships calculated by Standard & Poor’s, using a float-adjusted market capitalization methodology.

Barclays Municipal Bond Index is an unmanaged index considered representative of the tax-exempt municipal bond market.

Barclays US Corporate High Yield Index is an unmanaged index considered representative of fixed-rate, non-investment grade debt.

Barclays US Corporate Investment Grade Index is an unmanaged index considered representative of publicly issued, fixed-rate, nonconvertible, investment grade debt securities.

S&P 500® Dividend Aristocrats Index tracks the performance of 40 companies in the S&P 500® Index that have had an increase in dividends for 25 consecutive years.

DJ US Select Dividend Index represents the United States’ leading stocks by dividend yield, subject to screens for dividend-per-share growth rate, dividend payout ratio and average daily dollar trading volume.

There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply. The fund is subject to certain other risks. Please see the prospectus for more information regarding the risks associated with an investment in the fund.

Shares are not individually redeemable and owners of the shares may acquire those shares from the Fund and tender those shares for redemption to the Fund in Creation Unit aggregations only, typically consisting of 50,000 shares.

Beta is a measure of risk representing how a security is expected to respond to general market movements. Smart beta represents an alternative and selection index based methodology that may outperform a benchmark or reduce portfolio risk or both. Smart beta funds may underperform cap-weighted benchmarks and increase portfolio risk.

The momentum style of investing is subject to the risk that the securities may be more volatile than the market as a whole, or that the returns on securities that have previously exhibited price momentum are less than returns on other styles of investing.

The Fund is subject to the risks of the underlying funds. Market fluctuations may change the target weightings in the underlying funds and certain factors may cause the Fund to withdraw its investments therein at a disadvantageous time.

Fixed-income investments are subject to credit risk of the issuer and the effects of changing interest rates. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. An issuer may be unable to meet interest and/or principal payments, causing its instruments to decrease in value and lowering the issuer’s credit rating.

The values of junk bonds fluctuate more than those of high quality bonds and can decline significantly over short time periods.

The risks of investing in securities of foreign issuers can include fluctuations in foreign currencies, political and economic instability, and foreign taxation issues.

Most MLPs operate in the energy sector and are subject to risks relating to commodity pricing, supply and demand, depletion and exploration. MLPs are also subject the risk that regulatory or legislative changes could eliminate the tax benefits enjoyed by MLPs which could have a negative impact on the after-tax income available for distribution by the MLPs and/or the value of the portfolio’s investments.

Preferred securities may be less liquid than many other securities, and in certain circumstances, an issuer of preferred securities may redeem the securities prior to a specified date.

Investments in real estate related instruments may be affected by economic, legal, or environmental factors that affect property values, rents or occupancies. Real estate companies, including REITs or similar structures, tend to be small and mid-cap companies and may be more volatile and less liquid.

The Fund is non-diversified and may experience greater volatility than a more diversified investment.

About Dorsey, Wright & Associates, LLC (DWA)

The relative strength strategy is not a guarantee. There may be times where all investment and strategies are unfavorable and depreciate in value. Investors should not act on any recommendation (express or implied) or information in this material without obtaining specific advice from their financial advisor and should not rely on the information herein as the primary basis for investment decisions. There is no relationship between Dorsey, Wright & Associates, LLC (“Dorsey Wright”) and Invesco PowerShares (“PowerShares”) other than a license by Dorsey Wright to PowerShares of certain Dorsey Wright trademarks, tradenames, investment models, and indexes (the “DWA IP”). DWA IP has been created and developed by Dorsey Wright without regard to and independently of PowerShares, and/or any prospective investor. The licensing of any DWA IP is not an offer to purchase or sell, or a solicitation of an offer to buy any securities. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources, believed to be reliable. However, such information has not been verified by DWA or the information provider and DWA and the information providers make no representations or warranties or take any responsibility as to the accuracy or completeness of any recommendation or information contained herein. DWA and the information provider accept no liability to the recipient whatsoever whether in contract, in tort, for negligence, or otherwise for any direct, indirect, consequential, or special loss of any kind arising out of the use of this document or its contents or of the recipient relying on any such recommendation or information (except insofar as any statutory liability cannot be excluded). PowerShares® is a registered trademark of Invesco PowerShares Capital Management LLC, investment adviser. Invesco PowerShares Capital Management LLC (Invesco PowerShares) and Invesco Distributors, Inc., ETF distributor, are indirect, wholly owned subsidiaries of Invesco Ltd.

Investors cannot invest directly in an index.  Indexes have no fees.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  Neither the information within this blog post, nor any opinion expressed, shall constitute an offer to sell or a solicitation or an offer to buy any securities, commodities, or exchange traded products.  This blog post does not purport to be a complete description of the securities or markets to which reference is made.  Each investor should carefully consider the investment objectives, risks and expenses of any Exchange-Traded Fund (“ETF”) prior to investing.  Before investing in an ETF investors should obtain and carefully read the relevant prospectus and documents the issuer has filed with the SEC.  ETFs may result in the layering of fees as ETF’s impose their own advisory and other fees.  To obtain more complete information about the product the documents are publicly available for free via EDGAR on the SEC website (http://www.sec.gov).

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High RS Diffusion Index

March 16, 2016

The chart below measures the percentage of high relative strength stocks (top quartile of our ranks) that are trading above their 50-day moving average (universe of mid and large cap stocks.)  As of 3/15/16.

diffusion

The 10-day moving average of this indicator is 86% and the one-day reading is 92%.

The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  Investors cannot invest directly in an index.  Indexes have no fees.  Past performance is no guarantee of future returns.  Potential for profits is accompanied by possibility of loss.

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The Goal of Tactical Allocation

March 15, 2016

What is the ultimate objective of any tactical asset allocation strategy?  It is to adapt, is it not?  Getting “all of the up and none of the down” is a fairy tale, but investors would like to see changes in the allocations in order to seek to capitalize on those asset classes that are in favor and to seek to minimize exposure to those asset classes that are out of favor.  The exact percentage of a client’s overall portfolio that should be allocated to a tactical allocation strategy will be up to each financial advisor and their client, but I would suggest that investors could benefit from making tactical allocation part of the mix.  Whether an advisor uses our Global Macro strategy, one of the other Dorsey Wright tactical allocation strategies, or a tactical allocation strategy of their own making, I believe that there will be some common themes as it relates to communicating the objectives of this type of strategy to clients and prospects.  Our goal with this article is to touch on some of those themes.  See below for a description of our Global Macro portfolio.

Global Macro strategy description:

The Dorsey Wright Systematic RS Global Macro strategy provides broad diversification across markets, sectors, styles, long and inverse domestic and international equities, fixed income, currencies, and commodities using Exchange Traded Fund (ETF) instruments.  The strategy holds approximately ten ETFs that demonstrate, in our opinion, favorable relative strength characteristics.  The strategy is constructed pursuant to Dorsey Wright’s proprietary basket ranking and rotation methodology.  This strategy is uniquely positioned from an investment opportunity perspective because it is not limited to a specific market.  This allows for the flexible allocation of investments globally to opportunities where we believe potential returns are particularly compelling. 

As shown below, the Global Macro portfolio can invest in a broad range of asset classes.  The following table highlights the asset class exposure ranges for each asset class in the Global Macro portfolio.  There may be deviations outside the bands based on market fluctuations.

ranges

The allocations to this strategy are driven by relative strength (RS).  Over the nearly 7 years that we have been running this strategy, we have seen a variety of market environments and changes in asset class leadership.  The following chart highlights historical asset allocation exposure for the Global Macro portfolio.

gm_allocations

Period: 3/31/09 – 2/29/16

You will notice that there were times with very little U.S. equity exposure and times where U.S. equities constituted the bulk of the portfolio.  Again, those changes are driven by relative strength.

One of the interesting benefits of an asset class rotation strategy based on relative strength is how it manages volatility.  As investment themes come in and out of favor, an RS strategy rotates to themes that are currently in favor.  When volatile assets, such as stocks, are declining, an RS strategy might rotate into a much less volatile asset class, like bonds or currencies, that is holding up better.  This rotation helps make the portfolio more volatile when volatile asset classes are performing well, and less volatile when risky assets are out of favor.  The chart below shows the trailing-18 month beta of Global Macro and a 60/40 equity bond portfolio compared to the S&P 500.  The beta of the 60/40 strategy remains very stable over time.  The beta of the Global Macro strategy, however, changes dramatically.

changing volatility

Returns are total returns, inclusive of dividends.  Net returns were used for Global Macro.  The 60/40 portfolio is 60% S&P 500 and 40% Barclays Aggregate Bond Index.

More recently, the beta of the Global Macro strategy has been declining and is now approaching the beta of a 60/40 portfolio.

Current holdings (as of 3/10/16) of the Global Macro portfolio are shown below:

gm 03.10.16

Clients want adaptability in their asset allocation and Dorsey Wright provides the tools and solutions to empower financial advisors to be able to provide this to their clients — and to set them apart from the competition in the process.

Global Macro is available on the Masters and DMA platforms at Wells Fargo as well as on a number of other UMA and SMA platforms.

E-mail andy.hyer@dorseywright.com for more information.

The performance represented is based on monthly performance of the Systematic Relative Strength Global Macro 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.  All returns since inception reflect reinvestment of dividends and other earnings. Returns of Accounts, since inception, are a composite of all Accounts of that style that were managed for the full quarter. All returns since inception are compared against the Dow Jones Moderate Portfolio Index and the S&P 500 total return index.  The volatility of the Models and of actual Accounts may be different than the volatility of the Dow Jones Moderate Portfolio Index and the S&P 500 index.  The Dow Jones Moderate Portfolio Index is a global asset allocation benchmark.  60% of the benchmark is represented equally with nine Dow Jones equity indexes.  40% of the benchmark is represented with five Barclays Capital fixed income indexes.  The S&P 500 is a stock market index based on the market capitalizations of 500 leading companies publicly traded in the U.S. stock market, as defined by Standard & Poor’s.  The Barclays Aggregate Bond Index is a broad base index, maintained by Barclays Capital, and is used to represent investment grade bonds being traded in the United States.  The MSCI EAFE Total Return Index is a stock market index that is designed to measure the equity market performance of developed markets outside of the United States and Canada and is maintained by MSCI Barra.  The Dow Jones U.S. Real Estate Index invests in U.S. real estate stocks and real estate investment trusts (REITs).  The Reuters Commodity Index comprises 17 commodity futures that are continuously rebalanced.  Investors cannot invest directly in an index.  Indexes have no fees.  Dorsey, Wright’s advisory fees are described in Part 2A of its Form ADV.  Each investor should carefully consider the investment objectives, risks and expenses of any Exchange-Traded Fund (“ETF”) prior to investing. Before investing in an ETF investors should obtain and carefully read the relevant prospectus and documents the issuer has filed with the SEC.  ETFs may result in the layering of fees as ETFs impose their own advisory and other fees.  To obtain more complete information about the product the documents are publicly available for free via EDGAR on the SEC website (http://www.sec.gov) 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. The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value. Investors should have long-term financial objectives when working with Dorsey, Wright & Associates.

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Relative Strength Spread

March 15, 2016

The chart below is the spread between the relative strength leaders and relative strength laggards (top quartile of stocks in our ranks divided by the bottom quartile of stocks in our ranks; universe of U.S. mid and large cap stocks).  When the chart is rising, relative strength leaders are performing better than relative strength laggards.    As of 3/14/16:

spread

The RS Spread has pulled back sharply so far in 2016 as the RS laggards have outperformed the RS leaders.

The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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Weekly RS Recap

March 14, 2016

The table below shows the performance of a universe of mid and large cap U.S. equities, broken down by relative strength decile and quartile and then compared to the universe return.  Those at the top of the ranks are those stocks which have the best intermediate-term relative strength.  Relative strength strategies buy securities that have strong intermediate-term relative strength and hold them as long as they remain strong.

Last week’s performance (3/7/16 – 3/11/16) is as follows:

ranks

This example is presented for illustrative purposes only and does not represent a past or present recommendation.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  The performance above is based on pure price returns, not inclusive of dividends, fees, or other expenses.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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Sector Performance

March 11, 2016

The table below shows performance of US sectors over the trailing 12, 6, and 1 month(s).  Performance updated through 3/10/16.

sector

The performance above is based on pure price returns, not inclusive of dividends, fees, or other expenses.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.  Source: iShares

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Listing Today: (DWIN) PowerShares DWA Tactical Multi-Asset Income

March 10, 2016

Product Details:

The PowerShares DWA Tactical Multi-Asset Income Portfolio (the “Fund”) is based on the Dorsey Wright® Multi-Asset Income Index (Index). The Fund generally will invest at least 90% of its total assets in securities that comprise the Index. The Fund is a “fund of funds,” meaning that it invests its assets in the shares of other, underlying exchange-traded funds eligible for inclusion in the Index, rather than in securities of individual companies. The Index is designed to select investments from a universe of income strategies with the criteria for inclusion based on a combination of relative strength and current yield. The Fund and the Index are evaluated monthly for potential rebalance and reconstitution.

Click here for more information.

Investors cannot invest directly in an index.  Indexes have no fees.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  Neither the information within this blog post, nor any opinion expressed, shall constitute an offer to sell or a solicitation or an offer to buy any securities, commodities, or exchange traded products. This blog post does not purport to be a complete description of the securities or markets to which reference is made.

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High RS Diffusion Index

March 9, 2016

The chart below measures the percentage of high relative strength stocks (top quartile of our ranks) that are trading above their 50-day moving average (universe of mid and large cap stocks).  As of 3/8/16.

diffusion 03.09.16

After reaching a single-day low of 20% on 1/13/16, this index has rebounded sharply.  The 10-day moving average of this indicator is 80% and the one-day reading is also 80%.

The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in valueInvestors cannot invest directly in an index.  Indexes have no fees.  Past performance is no guarantee of future returns.  Potential for profits is accompanied by possibility of loss.

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The Case for Rules-Based Models

March 8, 2016

There is a passage in Steven Pinker’s book The Better Angels of Our Nature: Why Violence Has Declined focused on self-control which caught my eye:

Researchers Baumeister and his collaborators measured self-control by asking university students to divulge their own powers of self-control by rating sentences such as these:

I am good at resisting temptation.

I blurt out whatever is on my mind.

I never allow myself to lose control.

I get carried away by my feelings.

I lose my temper too easily.

I don’t keep secrets very well.

I’d be better off if I stopped to think before acting.

Pleasure and fun sometimes keep me from getting work done.

I am always on time.

After adjusting for any tendency just to tick off socially desirable traits, the researchers combined the responses into a single measure of habitual self-control.  They found that the students with higher scores got better grades, had fewer eating disorders, drank less, had fewer psychosomatic aches and pains, were less depressed, anxious, phobic, and paranoid, had higher self-esteem, were more conscientious, had better relationships with their families, had more stable friendships, were less likely to have sex they regretted, were less likely to imagine themselves cheating in a monogamous relationship, felt less of a need to “vent” or “let off steam,” and felt more guilt but less shame.  Self-controllers are better at perspective-taking and are less distressed when responding to others’ troubles, though they are neither more nor less sympathetic in their concern for them.  And contrary to the conventional wisdom that says that people with too much self-control are uptight, repressed, neurotic, bottled up, wound up, obsessive-compulsive, or fixated at the anal stage of psychosexual development, the team found that the more self-control people have, the better their lives are.  The people at the top of the scale were the mentally healthiest. (my emphasis added)

Although financial health was outside the scope of this particular study, I would suggest that self-control plays an equally important role in this sphere.  This a key reason that we have embraced rules-based investment management at Dorsey Wright.

While there are countless investment and self-help books that claim to be able to train people to develop greater self-control, I think that an even more effective way for investors to reap the rewards that accrue to the self-disciplined in the financial markets is simply to employ systematic investment models.  Our preference at Dorsey Wright is to execute relative strength-driven models, but there are surely also other investment models that can be applied systematically.  My experience in talking to numerous financial advisors on a regular basis is that those advisors who employ rules-based models tend to be more confident in their ability to provide value for their clients, tend to be more relaxed, and tend to be bigger producers than those without such an approach.

The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.

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Relative Strength Spread

March 8, 2016

The chart below is the spread between the relative strength leaders and relative strength laggards (top quartile of stocks in our ranks divided by the bottom quartile of stocks in our ranks; universe of U.S. mid and large cap stocks).  When the chart is rising, relative strength leaders are performing better than relative strength laggards.  As of 3/7/16:

spread

RS laggards have staged a mighty rally in recent weeks as reflected by the sharp pullback in the RS Spread.

The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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Weekly RS Recap

March 7, 2016

The table below shows the performance of a universe of mid and large cap U.S. equities, broken down by relative strength decile and quartile and then compared to the universe return.  Those at the top of the ranks are those stocks which have the best intermediate-term relative strength.  Relative strength strategies buy securities that have strong intermediate-term relative strength and hold them as long as they remain strong.

Last week’s performance (2/29/16 – 3/4/16) is as follows:

ranks

Big snap back for the laggards last week (many Energy and Basic Materials stocks).

This example is presented for illustrative purposes only and does not represent a past or present recommendation.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  The performance above is based on pure price returns, not inclusive of dividends, fees, or other expenses.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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Bring Some Sexy To Utilities ETFs

March 4, 2016

Benzinga on The PowerShares DWA Momentum ETF (PUI):

In addition to XLU, the PowerShares DWA Momentum ETF (ETF) (NYSE: PUI) has been enjoying the utilities sector resurgence this year. PUI, however, is a much different beast than traditional cap-weighted utilities ETF like XLU.

PUI tracks the Dorsey Wright Utilities Technical Leaders Index, which “is designed to identify companies that are showing relative strength (momentum),” according to PowerShares, the fourth-largest ETF issuer.

For size freaks, PUI probably was not on their radar until this year. The ETF has $116.6 million in assets under management, nearly $87.1 million of which has arrived this year. That makes PUI the fourth-best PowerShares ETF in terms of assets added.

As a momentum-based ETF, PUI is not exclusively allocated to large-caps. In fact, large-caps represent just over 23 percent of PUI’s weight, while small-caps account for nearly 31 percent of the fund.

PUI’s top 10 holdings include Duke Energy Corp (NYSE: DUK), NiSource Inc. (NYSE: NI) andWEC Energy Group Inc (NYSE: WEC).

Dorsey Wright is the index provider for PUI.  See www.powershares.com for more information.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.

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Optimal Allocation Between Stocks and Bonds

March 3, 2016

Daniel Morillo of BlackRock looks to see if the 60/40 allocation is the optimal mix of bonds and equities over time:

Since my last post on the merits of using equities to balance the risk of rising rates, I’ve been asked well, what is the right mix of equities and fixed income? Almost everyone’s top-of-mind answer is, of course, 60/40. It’s a portfolio that holds 60% equities and 40% bonds, and it’s widely used as a benchmark for numerous multi-asset or “balanced” allocation products. Financial professionals tend to use it as a reference point during portfolio allocation discussions with clients, and it’s widely quoted in the media.

So, does 60/40 hold up? I decided to sift through the numbers to see. What I found is that while, in general, a 60/40 portfolio may be a reasonable bet for long term investors, it might not always be the way to go for investors who hold strong convictions.

To come to this conclusion, I took equity and government bond returns from the DMS database[1], which includes annual return data for 19 countries since 1900. For each possible 10-year period in each country, I constructed the allocation that, over that particular 10-year period, would have delivered the best ratio of excess return to risk, aka the allocation with the best or “optimal” Sharpe ratio.

Figure 1 shows the average optimal bond allocation for each country, averaged across countries. Guess what? The overall average across countries and time is about 43% bonds (so, the remaining 57% would be in equities) — eerily close to the 60/40 rule.

Figure-1

So the answer is that,  yes, since 1900 the optimal mix of equities and bonds is approximately 60/40.

However, note the variability in the optimal allocation to bonds in the chart above.  In some 10-year periods it was best to have 90% allocation to bonds and in other 10-year periods it was best to have 0% allocation to bonds!  While some may look at this study and conclude that there is no need to be tactical, I look at this study and come to the exact opposite conclusion.

In fact, this is the very rationale behind giving ourselves so much flexibility in the amount of fixed income exposure that we can have in our Global Macro strategy.  See below for the ranges of exposure that we can have to fixed income (and other asset classes as well):

exposure ranges

See below for the historical fixed income exposure in our Global Macro portfolio:

fixed income

Inception of the Global Macro SMA was 3/31/09.

We believe that having a disciplined way to adapt is key to being able to generate good returns and good risk management in a tactical allocation strategy over time.  As shown below, Global Macro (also available as The Arrow DWA Tactical Fund, DWTFX) has been able to rise to the top of the Morningstar Tactical Allocation category over the past 3 and 5 years.  DWTFX has outperformed 95% of its peers over the past 3 years and has outperformed 73% of its peers over the past 5 years.

morningstar

Source: Morningstar, a/o 3/2/16

Investors don’t experience average.  Relying on long-term averages to come up with the optimal allocation to fixed income may be deeply problematic for investors who have a 10-30 year time horizon, rather than a 100 year time horizon.

Global Macro is available in the following:

  • Masters and DMA platforms at Wells Fargo Advisors
  • Envestnet
  • Numerous other firms (e-mail andy@dorseywright.com to find out if available at your firm)
  • The Arrow DWA Tactical Fund (DWTFX)
  • The Arrow DWA Tactical ETF (DWAT)

E-mail andy@dorseywright.com for a brochure.

The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  See www.arrowfunds.com for a prospectus.

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Politics and Investing

March 2, 2016

The Motley Fool on the problem with conflating politics and investing:

Economics is a close cousin of politics, which is dangerous because politics is a close cousin of emotional decisions detached from reality.

Not only do most of us have emotional opinions about who should/shouldn’t run the country, but we unfailingly overestimate how much influence presidents have over the economy and stock market. When presidents do impact the economy, good luck guessing how markets will respond. Lots of smart people predicted that Barack Obama’s spending plans meant surging interest rates and a collapsing dollar.

Growing the economy means getting everyone to win, whereas politics by definition means getting the opposing party to lose. Rationality melts when you set up this kind of my-team-versus-yours dilemma. Psychologist Geoffrey Cohen showed that Democratic voters supported Republican proposals when they were attributed to fellow Democrats more than they supported Democratic proposals attributed to Republicans, and vice versa. Imagine the same part of your brain analyzing investments. It’s a disaster.

I like politics, and I love investing. But I run from anything conflating the two.

Now if we could only find a method of filtering out the noise and investing in a purely objective way…

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High RS Diffusion Index

March 2, 2016

The chart below measures the percentage of high relative strength stocks (top quartile of our ranks) that are trading above their 50-day moving average (universe of mid and large cap stocks.)  As of 3/1/16.

diffusin

The 10-day moving average of this indicator is 68% and the one-day reading is 84%.

This example is presented for illustrative purposes only and does not represent a past recommendation.  The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.   Investors cannot invest directly in an index. Indexes have no fees. Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss.

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Relative Strength Spread

March 1, 2016

The chart below is the spread between the relative strength leaders and relative strength laggards (top quartile of stocks in our ranks divided by the bottom quartile of stocks in our ranks; universe of U.S. mid and large cap stocks).  When the chart is rising, relative strength leaders are performing better than relative strength laggards.    As of 2/29/16:

rs spread

This example is presented for illustrative purposes only and does not represent a past recommendation.  The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.   Investors cannot invest directly in an index. Indexes have no fees. Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss.

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Weekly RS Recap

February 29, 2016

The table below shows the performance of a universe of mid and large cap U.S. equities, broken down by relative strength decile and quartile and then compared to the universe return.  Those at the top of the ranks are those stocks which have the best intermediate-term relative strength.  Relative strength strategies buy securities that have strong intermediate-term relative strength and hold them as long as they remain strong.

Last week’s performance (2/22/16 – 2/26/16) is as follows:

ranks

This example is presented for illustrative purposes only and does not represent a past recommendation.  The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.  Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss. 

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