E Relative Opportunity With US Sectors

To remain in the tactical momentum sleeve of a portfolio the position must continue to satisfy the minimum conditions on a weekly review basis, except that the total return of an ETF, if greater than that of T-Bills, need only exceed that of the S&P 500 by 2%.A position might be replaced with a more attractive tactical selection if the total amount allocated to the tactical sleeve is fully invested. 

Comparative Price Charts (Vanguard all-cap sector ETFs) – Dividend Adjusted

(1 year weekly and 3 months daily as of mid-day 2018-10-04)

From a 1-year perspective, Technology (VGT, 30.11%) is first.Consumer Discretionary (VCR,20.76%) is second. Energy (VDE, 17.76%) is coming on strong, but has been through large drawdowns that reduce its appeal. Health Care (VHT, 16.41%) is fourth.

From a 3-month perspective, Healthcare is the strongest (11.12%), Technology is second (10.18%), Industrials are third (9.27%), and Financials are fourth (4.68%).

All factors considered, with no perfect choices, my inclination is to hold a core position in the S&P 500 or Total US Market and then overweight with Technology at the major sector level. 

There is more opportunity, however, to find tactical momentum opportunities within sub-sectors, which are primarily in the Technology and Health Care sectors, as this list of specialized ETFs shows:

Among our current tactical sleeve momentum ETF holdings in tax deferred accounts, two (FDN and HACK) no longer meet the retention requirements and will be sold tomorrow: 

A partial exception is ITA (aerospace and defense) which is held in some accounts as a thematic tactical overweight, as opposed to a momentum overweight, which would exempt it from the short-term performance requirements of a tactical momentum position.     

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Disclaimer: "QVM Invest”, “QVM Research” are service marks of QVM Group LLC. QVM Group LLC is a registered investment advisor.

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