Below readers can find commentary on the key changes to our Sector Selection Research Model (SSRM) across US, Europe and World sectors. This is done as an update to the thought leadership piece we published on Sector Rotation: Can the Approach Work in Different Countries?
As a reminder, the SSRM deploys a rule-based, sector rotation approach that targets the most relatively attractive sectors using a blend of price, macroeconomic and fundamental factors. The importance of these selection factors is captured in the dynamic weighting scheme of the research model.
Furthermore, the model provides for a mechanism that ensures risk is controlled and opportunities arising from dispersion are seized. In all, the approach comprises two major steps: sector selection and sector weighting.
US Sector Allocation
- Compared to previous months, price momentum has suffered severely and no single sector enjoys strong momentum, as defined by SSRM. For this reason, SSRM has mostly allocated into cash for the month.
- IT, which has been the beneficiary of strong momentum and fundamentals in previous months, has begun to falter. There is a small investment outflow from the sector and the rate of analyst downgrades has also exceeded the rate of upgrades.
- Active positioning in other sectors is generally light.
Performance of SSRM vs. Benchmark