Thursday, January 24, 2013

When world markets were leaving the US in their dust last Fall, Quant made a shift away from those foreign funds that so dominated its upper ranks into the US that at the time was mired in the fiscal cliff “debate”.  It had been a good ride on a wave that was about to crest and readers know Quant has been hanging most of its ten toes over the edge of a US longboard since then.  It’s been another good ride as the US market catches up with those international markets that provided so much outperformance for the model.  We have been saying it’s going to be difficult to keep outperforming the S&P 500 because Quant is currently favoring those same US issues.

A good example is today’s new entry into the top 10, the 6th place iShares Russell 1000 Fund (IWB).  Wedged between its small cap and broad market cousins in 5th and 7th place today, the 1000 represents the large cap slice of the US market and not surprisingly, is tightly correlated with the S&P 500.  Having almost 1000 constituents makes it a little less exposed to any one company but Apple still makes up more than 3% of AUM so it may stall a bit today.  It floats up into the top 10 for the first time since early November with nicely balanced scores in the mid to upper 60s which we like to say is better than if those scores were on your kid’s report card.  Except for its 95 Quality Score which would make any parent proud.   It may have been early in November but the fund has outperformed the MSCI ACWI since it began to score well again in late December.  Within its 69.4 Behavioral Score are very nice Technical Scores led by its Short Term measure of 85.2, this one is tube riding right now.  It doesn't look as sweet fundamentally but its appreciating valuation is supported by a 98 yield score.

In our short history since last July, the ETFG models have proven very adept at dropping in on the sweetest waves.  It’s been a gnarly market since then and Quant has found the sections you wanted to ride and for now that’s still the good ole USA.  So don’t be a kook getting rag dolled by a choppy market.  Check the ETFG rankings each day and hang-loose with the swells.

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