The Tactical Trend Allocation strategy seeks to identify favorable investment opportunities among six primary asset classes. Capital is rotated to the specific markets that our portfolio managers believe offer the strongest potential for price appreciation, and we act to control risk by underweighting or eliminating exposure to markets exhibiting negative price trends and elevated risk.
The current allocation breakdown in the strategy is 79% US equities, 10% international equities, and 11% cash. The domestic allocation has remained the strongest asset class in the strategy for over four years now, while the international allocation replaced fixed income in the second half of 2014.
The current domestic breakdown is split between broad indexes and more defined sectors and industries that allow us both to get broad market exposure and to drill down into areas that our relative strength and trend analysis deem investable. The largest current broad market holding is the equal-weighted S&P 500 (RSP) at 12.5%, while our largest sector/industry holding is in the financials with (NYSE:IYG) (i-Shares Financial Services) and (NYSE:IAI) (i-Shares Broker-Dealers) representing 15% of the overall strategy.
The international allocation is represented by a 5% allocation to Japan (NYSE:DXJ) and a 5% allocation to China through (NYSE:PGJ) (Powershares Golden Dragon). We monitor the dollar/yen scenario very closely as our current positioning in Japan is hedged to offset the weak yen. Recently, the yen has shown some mild recovery, and its relative strength versus the dollar ticked up but did not reverse. The primary sectors within PGJ are technology and consumer ADRs.
by Matt McAleer