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ETF Current Outlook

ETF Driven Strategy

Brian Rauscher, CFA

Head of Global Portfolio Strategy & Asset Allocation

Brian Rauscher

August Outlook 2022


Tickers in this report: $XLV, $XLP, $XLK, $XLE, $XLU

The rally which began at the June lows for the S&P 500 is still making its way higher as it gained some fuel last week after the FOMC meeting and Chair Powell’s press conference comments, which were taken quite bullishly because of some interpreting that a “Dovish Pivot” had been signaled. I have not and still do not agree with this view and it appears that several well-known economists, Fed watchers, and forecasters also seem to be skeptical. With that being said, the equity market was still oversold and positioning quite negative, and a squeeze has been started. So, there has been some fuel provided for a tactical trade to move equities higher, and my aggressive shorter-term metrics have flipped to favorable.

Although this has occurred, my more strategic indicators that are less sensitive to just daily price changes are still firmly unfavorable, which is why I have retained my cautionary and less than bullish stance that I have had since late March/early April. Some forecasters are feeling quite positive and are calling for additional gains and a small handful for new equity index highs, but respectfully to those who have this view, my indicators do not support this outlook. They suggest that this bear market has not reached its finale. Clearly, as the S&P 500 keeps moving higher, I am in the hot seat and am answering people’s legitimate questions, but I have a process and will stick with it as it has been extremely value-added over time. When my indicators suggest a sustainable investment bottom, I will surely leave my bear cave and go to the top of the mountain to declare my return to being a bull, as I did in March 2020. Unfortunately, that time has not yet come, and my research suggests that the current rally is likely to fail.

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