Midyear ETF Portfolio Positioning

July 13, 2018

Midyear outlooks are popping up everywhere with big-name investors and market experts sharing their views on what’s in store for the remainder of the year.  

In the ETF space, ETF strategists are also busy adjusting allocations and making investment decisions based on what they see as the best investing opportunities ahead. We asked four ETF strategies across the country to tell us how they are positioning client portfolios for the second half the year, and why.

Corey Hoffstein, Co-founder & CIO at Newfound Research in Boston 
At Newfound Research, we utilize a fully quantitative, rule-driven process to govern our investment decisions. While we expect portfolio positioning to change from time-to-time in response to rotational trends that may be emerging between asset classes, as a firm, we do not hold an opinion on near- or long-term economic outlooks. As we close out the first half of the year, our portfolio positioning can be instructive as to how our models are interpreting economic and political information flow into the market.

In our long/flat U.S. equity trend strategies, our models currently identify mixed strength in the primary U.S. large-cap sectors. Certain sectors, like energy and consumer discretionary, are exhibiting considerable robustness, while sectors like materials and industrials remain weak. While fully invested, the lack of trend breadth means our strategies are positioned to build meaningful allocations to short-term Treasuries more quickly during a sell-off than we typically see in a healthy bull market environment.

In contrast, we see much more consistent strength across sectors in the small-cap space.

In our Multi-Asset Income portfolio, we also see heavily mixed signals, though generally improving conditions (with the exception of emerging market debt). Positions like bank loans—ETFs such as Invesco Senior Loan ETF (BKLN), preferreds in the iShares U.S. Preferred Stock ETF (PFF), convertible bonds in the SPDR Bloomberg Barclays Convertible Securities ETF (CWB), and the Invesco S&P 500 BuyWrite ETF S&P 500 (PBP) have been stalwarts in the portfolio.



Rob Glownia, Fixed Income Portfolio Manager at RiverFront Investment Group in Richmond, Virginia
Assessing the potential path of global markets for the rest of the year, we expect more episodes of increased volatility, which are usually coincidental with market pullbacks. Given the increasing probability that the Fed will raise interest rates two more times this year, along with ongoing trade negotiations, we have lowered our equity exposure to neutral relative to our benchmarks.

Specifically, we’ve concentrated our sales in international equities due to their continued deterioration of momentum and sentiment, as reflected in our tactical process. We also believe the uncertainty surrounding tariffs and market access are having a bigger impact abroad than on the U.S.

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