Telegram

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.

FSI Sector Allocation Performance

Our research continues to indicate that a portfolio should be positioned to take advantage of the reopening US economy throughout 2021. Consequently, our FSI Sector Allocation clearly favors sectors that will benefit from the improving growth outlook and our outlook for a robust corporate profit recovery. A third bullish factor is the continuation of an accommodative policy stance by the Federal Reserve. Despite the possibility of some 1st quarter choppiness, our work on the U.S equity market remains bullish when looking out 6-12 months, and our sector allocation should help investors take advantage of this bullish backdrop.

The year begins with crosswinds that are impacting the S&P 500’s day-to-day trading. On the negative side is the near-daily news that the number of COVID-19 cases and hospitalizations remain severely elevated, the emergence of a potentially more infectious new strain of the virus, and the disappointingly slow rollout of the nationwide vaccination effort. Offsetting the gloom and doom stories are the recently passed fiscal stimulus package from Washington D.C., optimism in the efficacy of vaccines and new effective therapeutics, and a central bank that has stated that they will remain vigilant and supportive.

Importantly, we remind investors to try and not be overly influenced by any negative shorter-term fluctuations in equity prices and keep their attention of the bigger picture, which in our view is one of economic normalization, rising 2021 profits expectations from the depressed levels of 2020, and higher stock prices.

FSI Sector Performance ( June )

S&P 500 ( SPY )
Increased by 1.20%
FSI Sector Allocation
Increased by 0.95%
FSI vs Index
Decreased by -0.25%

Note: Performance period: June 01, 2021 through June 24, 2021

Year to Date FSI Sector Performance

S&P 500 ( SPY )
Increased by 13.70%
FSI Sector Allocation
Increased by 15.86%
FSI vs Index
Increased by 2.16%

Note: Performance period: January 01, 2021 through June 24, 2021

Inception to Date FSI Sector Performance ( 1st of October 2020 )

S&P 500 ( SPY )
26.94%
FSI Sector Allocation
29.34%
FSI vs Index
Increased by 2.40%

Note: Performance period: October 01, 2020 through June 24, 2021

FSI Sector Performance ( June )

Note: Performance period: June 01, through June 24, 2021

Year to Date FSI Sector Performance

  • FSI Sector Allocation
  • S&P 500

Note: Performance period: January 01, 2021 through June 24, 2021

Inception to Date FSI Sector Performance ( 1st of October 2020 )

  • FSI Sector Allocation
  • S&P 500

Note: Performance period: October 01, 2020 through June 24, 2021

Sector Performance

Sector ETF S&P Weight* FSI Weight* Start Price Current Price Month to Date Performance^
Materials XLB 2.80% 4.50% $87.26 $82.12 -5.89%
Industrials XLI 8.90% 14.20% $105.12 $102.15 -2.83%
Financials XLF 12.40% 19.80% $37.99 $36.49 -3.95%
Consumer Discretionary XLY 12.10% 14.90% $172.84 $176.81 2.30%
Energy XLE 2.80% 3.50% $52.21 $55.05 5.44%
Information Technology XLK 26.00% 32.10% $138.40 $145.40 5.06%
Communication Services XLC 11.00% 11.00% $78.79 $80.55 2.23%
Consumer Staples XLP 6.00% 0.00% $70.81 $69.15 -2.34%
Health Care XLV 12.90% 0.00% $123.60 $125.13 1.24%
Real Estate XLRE 2.50% 0.00% $43.26 $44.37 2.57%
Utilities XLU 2.60% 0.00% $65.16 $63.30 -2.85%
Total 100% 100%

*Weights as of the 1st Jun 2021

^Prices as of June 24, 2021

Conclusion

In terms of the FSI Sector Allocation, we successfully avoided the three worst sectors since our month-end September launch, which have been Utilities (XLU), Staples (XLP), and Real Estate (XLRE). On the flip side, we have been nicely exposed to four of the top six sectors during that span (Industrials/XLI, Materials/XLB, Comm Serv/XLC, and Tech/XLK). Unfortunately, our work had not turned fully favorable on the two biggest gainers, which were Energy (XLE) and Financials (XLF). We did marginally upgrade our view on both sectors over the past several months (XLF to neutral and XLE to tilt below), but our key indicators have not flashed the signals that we require to move them even higher. We will keep a close-eye on our relevant indicators to see if these areas warrant additional upgrades.

Overall, our allocation has been a balance between Value/Cyclicals and Growth/FAANG sectors that has provided an effective active management exposure for investors without having to pick individual stocks. We are satisfied that our approach has posted strong absolute performance and also outperformed the S&P 500 since inception. We very much expect that further relative gains will be achieved throughout the coming year.

FSInsight logo
150 East 52nd St, 3rd Floor, New York, NY 10022

Subscribe to our Free Weekly Report

An insitutional-grade report delivered to your inbox every week.

© 2021 FSInsight. All rights reserved. Developed by HANGAR115.

Illustrations by Karl Wimer.