ETF Complete Strategy Insights: Mid-Year Review

James Kimball | July 14, 2019

The ETF Complete model closed the week down -0.5% compared to the SPY which closed up +0.7%.

The market managed to eek out a new all-time and close at its highest levels on Friday. Earnings season is ramping up with a number of big names reporting next week. Initial consensus seems to be that earnings will on average come in a little light relative to prior expectations.

We had several position changes this last week in the Country and Global Macro models.

Stay tuned for the daily updates and log into the website to see holdings and additional performance data.

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This Week's Strategy Lesson: Mid-Year Review

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With July upon us, we have reached the half-way point of 2019. This is a good opportunity to briefly review how the markets and our models have performed so far this year.

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In terms of where the market was at as 2019 rolled into the station, the SPY was near the bottom of a -20% decline from the September 2018 high to the low on December 24th. The strong rebound in the SPY in January (up +8% in January) was largely retracing the December move down and the 20% gain year-to-date is only 2-3% over 2018 high, so the annual performance number is a little misleading in terms of showing overall market strength.

Many of the other strong performers shown above were in similar situations. USO was up almost 40% earlier this year, but it was recovering from a -44% drop in the last few months of 2018 and DBC, up around 10% year-to-date was down over -23% in the final months to close out last year.

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The sector models have had mixed performance so far in 2019. They currently sit between +6% and +15% on the year, though that is lagging a little relative to the index. The models were also coming off their lows to start the year, however, unlike the indexes, the ETF models are still off from their all-time highs in early 2018.

The Sector Conservative model had the lowest volatility, about on par with the index. Both the Aggressive and Moderate model have spent time lagging the index and briefly surpassing it in early May before the recent drop and correction.

The ETF allocations in the Sector portfolios remain mixed. In the Conservative and Moderate, we are in Home Builders, which is a traditional long sector, however, we are also in Gold Miners and Solar Power, which have alternative characteristics. The Aggressive is in Semiconductors and Technology, but also has an allocation into the alternative/rate sensitive Real Estate sector.

Next week we expand our analysis and look at the performance of the ETF Complete and its constituent models.