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ETF Performance

ETF Driven Strategy

Brian Rauscher

Head of Global Portfolio Strategy & Asset Allocation

Brian Rauscher

Brian Rauscher is a Managing Director and Head of Global Portfolio Strategy and Asset Allocation at FSInsight. He joined Robert W. Baird & Co. as Chief Portfolio Strategist in 2012 after 15 years on Wall Street. He has also worked on the buy side as the U.S. Equity Strategist at Fortress Investment Group on the Liquid Macro Fund. From 2004-2009, Rauscher was at Brown Brothers Harriman as the Director of Portfolio Strategy and Director of Research. Prior to that, he worked for five years as an investment strategist on the team of Wall Street legend Byron Wien, at Morgan Stanley.

October FSI Sector Allocation Performance

With October behind us, our work suggests that our FSI Sector Allocation is well positioned for the quarters ahead and for our expectations that the U.S domestic economy will continue to recover. As a reminder, our work is bullish when looking out 6-12 months for the U.S. equity market, and we are positioned to take advantage of that type of backdrop.

Over the past month, U.S. stocks have been heavily impacted by macro factors. The back and forth discussions about a new fiscal stimulus package between Speaker of the House Nancy Pelosi and Treasury Secretary Steven Mnuchin fueled both optimism and pessimism throughout October, but the month ended in disappointing fashion as the two sides were unable to strike a well needed deal for the economy.

Also impacting equity market performance was the increasing number of COVID19 cases around the world that occurred toward the back half of the month, which caused angst among investors. Lastly, the headlines and uncertainty surround the upcoming US Presidential election have caused market volatility to rise as worries about a contentious outcome have become more widespread.

Overall Month FSI Sector Performance

S&P 500 ( SPY )
Increased by 1.31%
FSI Sector Allocation
Increased by 1.14%
FSI vs Index
Decreased by -0.17%

Note: Performance period: December 01, 2020 through December 02, 2020

Performance from Inception ( 1st of October 2020 )

S&P 500 ( SPY )
Increased by 14.74%
FSI Sector Allocation
Increased by 14.69%
FSI vs Index
Decreased by -0.05%

Note: Performance period: October 01, 2020 through December 02, 2020

S&P 500 vs FSI Sector Allocation Performance December

Note: Performance period: December 01, 2020 through December 02, 2020

S&P 500 vs FSI Sector Allocation Performance Since Inception

Note: Performance period: October 01, 2020 through December 02, 2020

Sector Performance October

Sector ETF S&P Weight* FSI Weight* Start Price Current Price Month to Date Performance^
Materials XLB 2.30% 4.00% $70.99 $70.85 -0.20%
Industrials XLI 8.80% 15.10% $88.03 $87.93 -0.11%
Consumer Discretionary XLY 11.30% 19.50% $157.26 $157.44 0.11%
Communication Services XLC 11.20% 15.30% $65.40 $67.22 2.78%
Information Technology XLK 24.20% 33.30% $123.48 $124.87 1.13%
Financials XLF 12.80% 12.80% $27.88 $28.62 2.65%
Health Care XLV 14.20% 0.00% $109.74 $111.49 1.59%
Energy XLE 2.00% 0.00% $36.76 $38.13 3.73%
Consumer Staples XLP 7.50% 0.00% $66.91 $66.94 0.04%
Real Estate XLRE 2.60% 0.00% $36.50 $36.57 0.19%
Utilities XLU 3.20% 0.00% $62.84 $63.70 1.37%
Total 100% 100%

*Weights as of the 1st Dec 2020

^Prices as of December 02, 2020

Conclusion

In terms of the FSI Sector Allocation, we successfully avoided three of the worst five sectors during the month, and, in particular, the energy (XLE) sector, down nearly 5% last month. Overall, our allocation was balanced and provided effective active management exposure for investors without having to pick individual stocks. The fact that our positioning was offensive during a challenging month and our performance was close to benchmark is a victory.

It was an incredible month to have launched our new service. The FSI Sector Allocation strategy was able to perform and give investors a fighting chance. In our view and based on our research, rising market anxiety and volatility that makes the equity backdrop challenging also creates opportunities that investors can take advantage of by using the right tools.

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Illustrations by Karl Wimer.