Monday’s close marked the evaluation of the Seasonal Quarter Fund Score Method (FSM) Models.

Monday’s close marked the evaluation of the Seasonal Quarter Fund Score Method (FSM) Models. Over the next couple of days, the report will explore the themes of some of the more notable FSM Models and changes.  

The first two models covered will be two of the ETF FSM strategies, the FSM Core Solution US Core 2S PR4050 (FSMCORESOL1-USCORE-2S-PR4050) and the FSM Core Solution All Cap World 2S PR 4050 (FSMCORESOL2-ACW-2S-PR4050).

The change to the US Core Model involves the removal of the SPDR S&P 500 Trust (SPY) and the addition of the Invesco S&P 500 Low Volatility ETF (SPLV). Considering the downside witnessed so far within US Equities this year, the addition of the Low Volatility fund may come as no major surprise as it enters the US Core Model for the first time since 2022. SPLV currently possesses a fund score roughly 0.2 points higher than SPY, and action over the past week has seen SPLV move its 150- and 200-day moving average, while hovering around its 50-day. Along with SPLV, the US Core Model continues to hold the iShares MSCI USA Momentum Factor ETF (MTUM) – a holding since November last year.

The Low Volatility theme continues within one of the two changes of the All Cap World Model, which is removing the Invesco S&P 500 Pure Growth ETF (RPG) and iShares Morningstar Mid Growth ETF (ICMG) and the adding the Invesco S&P International Developed Low Volatility ETF (IDLV) and the iShares MSCI USA Momentum ETF (MTUM). While both the US Core and All Cap now maintain the Momentum factor by way of MTUM, they differ with the Low Volatility exposure in the All Cap World Model coming from international developed markets. IDLV slightly edges out SPLV in terms of fund score, as the ETF has maintained a buy signal since August last year on its point and figure trend chart and recently rallied to a 52-week high. Looking at back tested data for the All Cap World Model, it marks the first time in more than 20 years international developed low volatility exposure has been a holding.

The addition of SPLV and IDLV is intriguing timing considering the change in the calendar to May. But as has been highlighted in recent days, the complementary nature of Momentum and Low Volatility provides an intriguing portfolio mix as investors enter the summer. Additionally, FSM Model’s inclusion of international equity exposure will be explored further in tomorrow's report.