Articles by Greg Swenson, CFA Director of Equities

The bookends of our sector rankings seem to have stabilized after a very rocky start to the year. The only changes in the past few months have been in the middle of the standings, with Health Care, Industrials, Utilities, and Materials oscillating between the #5 and #8 positions.

The Core, Select Industries, and Grizzly strategies all posted declines in July, though Grizzly held up relatively well in a strong equity market. Core remains modestly net long with the Major Trend Index in High Neutral, while Select Industries saw strength in cyclical areas like Travel & Leisure and Banks but weakness in Education Services and Health Care. Positioning reflects targeted overweights in sectors and industries with favorable growth and valuation profiles, while avoiding areas with heightened risk or weak fundamentals.

The cyclical sectors of Consumer Discretionary, Industrials, and Materials have climbed from the bottom of our sector rankings, three months ago, to now occupy the fourth, fifth, and sixth positions, respectively.

And just like that, we’re thrust back into the good ‘ole days where Roaring Kitty was a household name and SwaggyStocks.com was one of our bookmarks in Internet Explorer (RIP). Highly-shorted stocks are back in vogue among the retail crowd. Those virtuous crusaders—or perhaps compulsive gamblers—brave or stupid enough to crowd into names with almost 50% of shares sold short have returned for another round of “sticking it” to the short-sellers*.

June delivered solid gains across strategies, with Core up 3.5% and Select Industries gaining 5.9%, driven by AI infrastructure exposure and strong stock selection. Core remains ahead of major benchmarks year-to-date despite a defensive tilt. AdvantHedge held its ground in a rising market, with short positions in underperforming Consumer Staples sectors contributing to relative strength.

Regional Banks were sold from the Leuthold Select Industries Portfolio as challenges in lending and commercial real estate exposure weighed on the group. The portfolio remains overweight in Communication Services and Financials, while exposure to Consumer Staples, Energy, and Real Estate is zero. Despite recent volatility, Attractive-ranked groups continue to offer a diversified mix and are outperforming year-to-date.

All three strategies posted strong relative results in May. Core gained 3.3% with balanced net equity exposure, while Select Industries advanced 7.1%, outpacing both large and small cap indexes. Grizzly Short managed downside well, declining 5.0% in a sharply rising market. The Major Trend Index shifted to Neutral, signaling a more constructive technical backdrop.

Growth quickly U-turned and led the market higher over the last two months, while low volatility stocks have been discarded. Momentum has weathered the volatility well so far—especially within small caps.

The strategy holds equity groups that participate when the market moves higher, as well as industries that are more defensive and well insulated from tariffs. 

In April, Leuthold’s Core strategy gained 0.7%, benefiting from positive returns across equities and fixed income despite volatile markets, while the Major Trend Index remains in its bearish zone with net equity exposure at 46-48%. The Select Industries strategy rose 0.6%, outperforming broader indexes by shifting toward defensive, tariff-insulated industries like Data Processing and Gas Utilities. AdvantHedge posted a strong 2.4% gain, capitalizing on tariff-sensitive sectors and earnings disappointments, with an overweight to Industrials and Materials.

The Select Industries portfolio is shifting defensively in response to evolving Group Selection Scores, exiting Homebuilding and Interactive Media while adding to more stable industries like Data Processing, Education Services, and Gas Utilities. April’s volatility also drove a broader rotation across the GS framework, with cyclicals like Airlines and Internet Services making way for more resilient Health Care and Reinsurance names. While Financials still offer upside if uncertainty fades, rising tariff risks have pushed several Consumer and Tech groups into the Unattractive category.

Markets remained volatile in March, with growth stocks facing significant losses, particularly within large-cap sectors. The Core strategy, down just 2.2%, continued to outperform relative to traditional equity options thanks to its defensive positioning. Meanwhile, the Select Industries strategy benefitted from safe-haven sectors like healthcare and precious metals, while AdvantHedge saw a solid 5.9% gain, driven by profitable short positions in overvalued consumer and tech stocks.

The strategy sold Airlines and Apparel Retail and put the proceeds into a defensive basket consisting of Data Processing & Outsourced Services and Gas Utilities.

March marked the second consecutive month of historically poor growth performance, capping the worst back-to-back stretch since the global financial crisis. While low volatility and value surged, growth and momentum were hit hard—raising big questions about how much downside remains and whether safety now comes at too steep a price.

Select Industries was down 4.1% in February, lagging the S&P 500, but in-line with mid and small cap benchmarks.  Homebuilding continued to struggle with buyer affordability and shrinking margins, while growth-oriented groups like Interactive Media and Internet Services sold off amid the rotation out of growth.  Holdings in defensive industries (Health Care, Telecom, Insurance) worked to offset weakness throughout the rest of the portfolio.  The strategy is up 1.9% year-to-date.

The strategy initiated new group holdings in Airlines and Education Services, while liquidating Construction & Farm Machinery & Heavy Trucks, Reinsurance, and our DOGI theme (Department of Government Inefficiency). 

While the momentum factor often sees sizeable performance swings, in February, growth was the outlier with a -9% spread—the worst since September 2008. Growth has become very correlated with beta, making it more susceptible to underperformance during a flight to safety.

The market continues to hover near new highs as the Major Trend Index holds steady at Neutral, with tactical equity exposure remaining near 60%. January saw strong performance across the Core and Select Industries composites, driven by solid long-short equity and fixed income returns, while AdvantHedge faced some headwinds from underexposure to major growth stocks, but that was partially offset by successful short positions elsewhere. Select Industries benefitted from gains in Internet Services & Infrastructure and Hotels & Leisure, as digitalization and post-pandemic recovery continue to support these sectors.

There were two new group positions this month: Internet Services & Infrastructure and Hotels & Leisure. Trading Companies & Distributors was sold.

Select Industries was down 7% in December as the breakdown in internal breadth provided a significant headwind for our all-cap investment universe.  While the final result was a sizeable lag versus large cap indexes, the strategy was in-line with mid and small cap indexes.