iSectors®, LLC 3rd Quarter 2018 Summary Commentary

By iSectors Chief Investment Officer, Chuck Self on October 26, 2018

Summary Overview

• Standard & Poor’s 500 (S&P 500) Index rose 7.71% during the quarter and was up 17.91% over the past twelve months.
• MSCI All Country World ex US Index (international stocks) underperformed US stocks by rising 4.40% in the quarter and by being up only 10.35% over the past twelve months.
• MSCI Emerging Markets Equities Index dropped 1.09% for the quarter and increased by 0.81% over the past twelve months.
• Barclays US Aggregate Bond Index underperformed stocks by rising only 0.02% during the quarter.  The index declined 1.22% over the past twelve months.
• Rogers International Commodities Index decreased by 1.30% for the quarter and was up 11.04% over the past twelve months.
• Gold underperformed the broad commodity market by falling 5.05% in the quarter.  It decreased by 7.47% over the past twelve months.

iSectors Allocation Model Commentary

iSectors Post-MPT Allocations

• The Post-MPT Growth and Moderate Allocations underperformed its benchmarks by rising 1.38% and 1.04%, respectively, in the quarter.
• Post-MPT Growth was up 7.17% over the past twelve months while Post-MPT Moderate rose by 7.33% over the same period. Both allocations underperformed their benchmarks, the S&P 500 and the 60/40 stock/bond index respectively. (60/40 = 60% S&P 500 and 40% Barclays US Aggregate Bond Index.)
• With more than twelve years of real-time performance, Post-MPT Growth has outperformed the S&P 500 since its 2005 inception with less drawdown. Historically, Post-MPT Growth has outperformed equities in flat to negative markets due to the model’s ability to change its exposure within a universe of low correlated asset classes and flexibility to own more conservative asset classes when market conditions are unfavorable.
• During the quarter, Post-MPT Growth and Moderate were positively impacted by their technology and financial holdings. Allocations to Treasury bonds negatively affected returns in both strategies.
• Both models continue to be positioned for a slow growing economy. Treasury bonds and utilities are large positions in both allocations. Post-MPT Growth is also overweighted in financials while Post-MPT Moderate has an above-market technology position. Post-MPT Growth lowered utilities and raised technology weightings while Post-MPT Moderate positioning remained mainly unchanged during the quarter.