Articles by Greg Swenson, CFA Director of Equities

Growth has performed much better among large caps than small caps, resulting in higher relative valuations for large caps. Based on factor valuations, we think value provides a more attractive large-cap entry point, while growth looks more attractive within small caps. 

The Core Fund was down 1.1% in August, as equities and fixed income both posted negative returns for the month. 

The GS Scores help Leuthold Select Industries portfolio identify underappreciated themes that can turn into multi-year holdings. Managed Health Care has been a holding for over 13 years, while Semiconductor Equipment (seven years), and Homebuilding (six years) have also been long-term winning positions.

While it was a small jump, from #6 to #5 in the sector composite ranks, Financials might be seeing the start of overall improvement. Conversely, Materials and Energy continued to drop in the latest ratings, as fundamental measures deteriorated.

Core was up 1.5% in July, as positive performance from equities was supplemented by positive contributions from commodity and fixed income holdings.

The portfolio takes a very active approach within sectors, with almost half of its Consumer Discretionary weight allocated to Homebuilding, while completely avoiding Chemicals within the overweight Materials sector. 

All the talk has been about mega-cap growth stocks, but equities with low-quality characteristics have fared even better. High beta, negative earnings, and those with high short interest have trounced the rest of our universe.

The Major Trend Index currently sits at Neutral, with negative readings from the Valuation, Cyclical, and Sentiment categories offset by the Technical category that, while positive, isn’t as strong as we would expect given the rally since last October. Our tactical accounts are positioned accordingly with net equity exposure at 53%, near the middle of our typical 30-70% range. 

The Group Selection Scores have performed well in the first half of 2023, not an easy feat considering the abrupt style reversal that took place in January. Value and technical indicators are struggling, but the rest of the model is more than picking up the slack.

The Core Strategy was down 0.7% in May.  Long equities were lower for the month (see description below), along with the fixed income and alternatives holdings. 

Exposure to commodities (and defense) has fallen rapidly within Select Industries. The primary beneficiaries of that reduction are growth-oriented groups.

The Core Fund was up 0.7% in April as the equity, fixed income, and alternative allocations all turned in positive performance for the month.

The preference for defensive industries and sectors in April led to the outperformance of low volatility stocks, while growth lagged. YTD factor results have been poor, with negative spreads for momentum, profitability, value, and low-vol.

As an all-cap strategy, Select Industries is currently targeting larger market-cap themes via our “Big” groups from Info Tech, Communication Services, and Health Care.

The Core Fund was up 1.2% in March, managing to outperform the strategy’s long equity holdings thanks to superior performance from the fixed income and gold positions.

Volatility returned, as two large bank failures had investors questioning growth expectations. Value was hit the hardest; growth was the main beneficiary. 

A combination of strength from Information Technology with weakness from Energy resulted in the two swapping places in our sector ranks this month. 

The Major Trend Index current sits at Neutral, down one notch from its High Neutral reading entering February as the market pullback was enough to cause some deterioration in the Technical indicators. Equity exposure remains at 55% across tactical accounts.

Factor performance stabilized in February, recovering from a brutal start to the year. While those dynamics bled into the first two days of February, the trend quickly reversed as interest rates bounced off recent lows and stayed on an upward trajectory for the rest of the month.

Utilities, Real Estate, and Consumer Staples are the bottom three sectors among the GS Scores.