Tactical Asset Allocation Relative Strength Signal (TAARSS) Monthly Update TAARSS says prefer a mix of Bonds and Equities in Q2
Top recommendations for April: European, German, Japanese, and Indian equities, and US Intermediate IG Credit.
Risky assets were challenged again in March with Global equities (ACWI) and Commodities (DBC) retreating by 1.5% and 6.0%, respectively. While US bonds (AGG) ended slightly positive at 0.4% as rising rates concerns eased.
TAARSS rotation strategy monthly performance review
Most quarterly and monthly TAARSS strategies outperformed their respective benchmarks during Q1 and March, respectively.
Tactical positioning for Q2 and April 2015 based on TAARSS
For Q2 we recommend an almost equal mix of Bonds and Equity, while limiting Commodity to a minimum allocation. Basically markets are divided, some investors are confident on growth others are not as sanguine, therefore it should pay off to be diversified. In terms of fixed income term allocations, prefer the belly of the curve during Q2, effectively lowering duration respective to Q1.
This month in global equity markets prefer Intl DM over EM, and stay neutral to the US. Region wise prefer Europe and Asia Pacific, while staying neutral to North America, and away from Latin America. In US equities prefer Small and Mid caps, while keeping Large Caps at a minimum. Sector wise Domestic Cyclicals show the best support, especially Consumer Discretionary. Defensives are mixed with Telecom and Health Care showing support, while Utilities and Cons. Staples suggesting selling pressure. Industry wise we highlight Aerospace & Defense which continues to experience very strong support. In Intl DM countries prefer Germany and Japan. Within EM countries India continues to show strong investment demand support despite the performance setback last month; similarly Taiwan has also experienced some good support. The rest of the countries seem weak. For Fixed Income prefer credit over rates, but stay within investment grade.