Elev8 Sector Rotation Portfolio: November Attribution Report
Our Elev8 Model logged a successful month in November (please see our new Elev8 December Positioning). Our positioning for November was informed by 3 main components. The technical setup for each of the 11 GICS Sectors and the stocks within them, our macro-overlay, which considers the trends in equities, interest rates, commodities and USD, and a tactical overlay that boosted scores for commodities and low vol. sector exposures for November.
The installation of a second Trump Administration resulting from the US Presidential Election on November 5th triggered a rebalance of our positioning on November 6th as the Energy Sector broke out to the upside in a clear bullish reversal on the news.
Prior to our rebalance we started the month with zero exposures in Energy, Materials and Healthcare Sectors. Our rebalance on November 6th added cyclicality and reduced our exposure to lower vol. sectors by funding our move to Energy by selling Utilities and Real Estate Sector exposure.
The Elev8 Model inputs were as follows to start November:
The beginning positions were as follows:
Our biggest bets were historically bullish exposures Financials (XLF) and Comm. Services (XLC). We complimented that core positioning with longs Industrials (XLI) and Technoloogy (XLK) to make sure we had positions in historically bullish exposures given the strength of the multi-year uptrend for US equities. Softness in commodities prices and interest rates had us in Utilities (XLU) and Real Estate (XLRE) to notionally lower the volatility profile of the portfolio as we had expected a chaotic period around the election which didn’t end up materializing.
Donald Trump’s successful bid for the presidency, and an election that didn’t roil markets with a drawn-out tabulation process, triggered a bullish pivot in our positioning. Our pre and post rebalance results are shown below at instrument level in our attribution tool.
Results
Begin Month to 11/6 Rebalance
11/6 – 11/29 & Combined Total
At the security level our biggest positive contributors were our long exposures in Sectors that historically outperform in bull markets with Financials and Comm. Services positions contributing +64bps of excess return to the portfolio over November. Our negative contributors were lower vol. positions and commodities exposures. Our tactical rebalance was a small negative contributor to results.
Overall positive results in November marked the 3rd consecutive positive month for the model which has outperformed by +146bps vs. the S&P 500 benchmark since the beginning of September.
