Monday’s (10/20) feature highlighted last week’s change in high yield credit spreads and the near-term impact to the trending picture of regional banks. The recent headwinds and hurdles for broader financials have NOT been low ones to surpass and has compounded a steadily weakening technical picture for the sector. As highlighted in Monday’s feature, financials have fallen to fourth behind industrials and outside of the upper echelon of leadership (top three sectors) within the NDW DALI sector rankings for the first time since early 2024.

The sector’s signal tally deterioration since the beginning of the year has been methodical, with the decrease accelerating further in the latter half of the year and making financials account for the most loss in relative strength through Monday’s close (10/20). In fact, financials is the only broad sector to see deterioration in tally signal count during each quarter so far. Conversely, basic materials are the only sector to see an increase each quarter.

Given financials continued RS deterioration, examining under the hood of subsector relative strength reveals intriguing takeaways. Below are the market relative strength charts of the SPDR S&P Regional Banking ETF (KRE), SPDR S&P Banks ETF (KBE), and Financial Select Sector SPDR Fund (XLF) against the S&P 500 Equal Weight Index (SPXEWI) on their default scale of 3.25%. While an investor may have initially thought that recent negative RS shown by regional banks has solely driven negative RS for the broader sector in the NDW DALI sector rankings, the market RS chart reveals the regional banking space has shown long-term negative market RS since April of this year. Last week’s action brought both the market RS charts back into Os, exhibiting negative near-term RS after showing positive RS through the summer. With that reversal, the market RS chart of KBE is now one to closely monitor as it resides within a couple of boxes of a potential RS signal change. The broader sector representative’s RS chart still maintains a column of Xs on its market RS chart, but the sector is currently buoyed by the broker dealer and exchange space from a relative perspective within the DALI sector rankings as the iShares U.S. Broker Dealers & Securities Exchanges (IAI) continues to maintain positive near-term and long-term relative strength.

Recent financial holdings that have violated notable support on their trend charts or seen notable technical deterioration elsewhere would be ones to evaluate. Feel free to reach out to an analyst at (804)-320-8511 for questions.

Consider a hypothetical scenario: Your client has just inherited $1 million and wants to invest half of it. What’s the best way for you to proceed? Should you invest it all at once or portion it out over time? If you invest the lump sum now and the market takes a sudden downturn your client won’t be happy. However, they also probably won’t be pleased if you average in over time, the market moves higher, and they miss out. So, what should you do? Won’t the results be dramatically different based on when you invest? After all, going all-in in February 2020 would have been a lot different than going all-in two months later.

To gain some insight into these questions, we looked at two scenarios for investing the client’s windfall for 10 years, an “All In” strategy and an “Average In” strategy. To mitigate the impact of time period selection (e.g., investing in February 2020 just before the COVID crash vs. in April 2020 just after the bottom) we calculated the returns for both scenarios every month from January 1985 through October 2015 (the last month for which we could calculate a 10-year forward return).

The “All In” Strategy - This scenario assumes you invested all available funds in the S&P 500 (SPX) at the beginning of the period. So, for example, in January 1985 all available funds would be invested in SPX for the next 10 years. We then calculated the returns for a hypothetical start date of February 1985, March 1985, and so on, through October 2015.

The “Average In” Strategy – This scenario assumes you invested an equal amount of the portfolio in the S&P 500 each month over the entire 10-year period. As with the “All In” strategy, we calculated the returns for the “Average In” strategy for hypothetical start dates at the beginning of every month from January 1985 through October 2015.

The results of our test are shown below.

Our test shows that, historically, going “All In” has clearly been superior to the “Average In” strategy. This may not be terribly surprising, after all, the market generally goes up over time, and with the “All In” strategy, you have the power of compounding on your side. What may be surprising, however, is the magnitude of the difference. On average, the “All In” strategy outperformed the “Average In” strategy by more than 75% on a cumulative basis. There was also a dramatic difference in the best performance for each strategy - going ‘All In’ in October 1990 generated a maximum 10-year return of over 370%, meanwhile the best return for the “Average In” strategy” was a relatively paltry 145%. Not only did the “All In” strategy generate higher average, median, and maximum returns, but it also produced positive returns more consistently, albeit by a slim margin. The “All In” strategy produced positive returns just under 92% of the time. There were 371 months in our test period, giving us 371 observations or hypothetical portfolios. Of these, only 28 produced a negative 10-year return. Interestingly, all 28 came in consecutive months from October 1998 through January 2001, near the height of the dot com bubble. The “All In” strategy also outperformed the “Average In” strategy with notable consistency – out of our 371 observations, “All In” outperformed “Average In” 340 times.

With over 350 observations it would be impractical for us to show the results for every hypothetical start date in our test. However, we have included a sample below that shows the 10-year forward returns for each strategy at the beginning of each calendar year from 1985 – 2015

In addition to a “windfall” scenario, these results may be relevant given the current market conditions. With stocks trading near all-time highs, you may have clients who are apprehensive about adding exposure; and while there’s no guarantee that the S&P will be higher next month or next year, historically, it’s usually better to go ahead and put that money to work quickly than it has to slowly ease in.

A few notes about our findings: our test looked at the results of investing in a lump sum vs averaging into exposure for the S&P 500 over a long time horizon (10 years). It should not be assumed that we would see similar results over a shorter period or for a different asset, like single stock exposure.

DCI Donaldson Co Inc. R ($84.16) - Waste Management - DCI is a 3 for 5’er that ranks within the top third of the favored waste management sector matrix and has shown positive near-term relative strength against the market since October 2022 and peer group since earlier this month (Oct. 2025). On the default trend chart, DCI has maintained a buy signal since April and positive trend since June of this year. This week’s action brought about a fourth buy signal with a triple top break at $84, a new all-time chart high. Long exposure can be considered here on the breakout or on a pullback to support at $80. We will set our stop loss point for the position at $67, which would violate multiple levels of support in the upper $70 to $80 range and the bullish support line. The current bullish price objective lies at $92, giving the stock a reward to risk ratio above 2 even at highs. DCI maintains a yield of 1.45% and earnings for the stock are due on 12/2.

Daily Option Ideas for October 21, 2025