Social responsibility moved above the 4.00 average score threshold for the first time following market action Wednesday.
Strength continues to broaden on the Asset Class Group Scores (ACGS) page, as market action Wednesday led to 40 groups now possessing average scores above the sought after 4.00 level. This equates to almost 30% of the total groups, meant to represent the full investible universe, now scoring in the “blue sky zone,” with a total of 88 groups (65%) showing average scores above 3.00. In looking at those areas at the top of the rankings, we continue to see a diverse list of names demonstrating technical strength, with representatives from domestic equities, international equities, fixed income, and alternative investments such as precious metals all find a place among the ACGS leadership. Recent market action has produced some newcomers to this high field position, with a specific focus on the social responsibility group.
Social responsibility is one of the more interesting equity-focused groups we have on the ACGS system, as it includes names from various asset classes that all meet certain environmental, social, or governance (ESG) criteria. The group has seen some major movement thus far through 2020, reaching a previous high of 3.99 on February 6th before showing drastic score deterioration in its descent to a near-term low of 3.02 on April 3rd. While social responsibility funds were not strangers to the March drawdowns that were felt across almost all equity markets, the group did hold a favorable position with a fund score north of 3.00 throughout the market turbulence. After moving sideways in score for April and much of May, the group began to move swiftly higher to most recently cross above the 4.00 score threshold for the first time ever following market action on Wednesday. Furthering this improvement, social responsibility also carries a positive average score direction of 1.22, benefiting the strong technical picture. Those looking for potential ideas within this space can use the “Ideas” link to the left of the group name in the ACGS page.
In addition to the multitude of social responsibility ideas available on the ACGS rankings, we also have the FSM ESG100 Sustainable All Asset Rotation 5S PR4050 model available for those seeking a more objective, rules-based way to play the space. This model looks at an inventory of 100 ESG ETFs and mutual funds following the typical five-holding FSM approach, which is evaluated at the beginning of each seasonal quarter. The strategy also utilizes the PR4050 trigger to cash, which allows it to become defensive should the need arise. In following the five-holding FSM approach, the model will seek to hold the top five scoring funds in its inventory at the time of each model evaluation, which we last saw in early-May. While the model could potentially invest in “risk-off” areas of ESG-related fixed income, the most recent model evaluation led to full exposure towards US equity positions. The portfolio is currently overweight technology, consumer cyclicals, and healthcare, which matches up well with the highest-ranked sector groups on the ACGS page. These holdings have produced a year-to-date return of 7.18%, which bests its benchmark CSIFX by over 350 basis points. Those looking to follow the FSM ESG100 All Asset Rotation strategy may do so by clicking on the “bell” icon under the Actions/Activity column on the models listing page. The next model evaluation will be occurring at the beginning of August.
