Day Hagan/Ned Davis Research Smart Sector® Balanced Portfolios

Strategy Description

  • The Smart Sector® Balanced Portfolio strategy combines three Ned Davis Research quantitative investment strategies: the NDR Smart Sector with Catastrophic Stop, the Smart Sector® International, and the NDR Smart Sector® Fixed Income.

The Process Is Based On The Weight Of The Evidence

The strategy begins by overweighting and underweighting U.S. sectors, International regions, and fixed income categories based on Ned Davis Research’s proprietary models.

  • Each of the models utilizes sector-specific, weight-of-the-evidence composites of fundamental, economic, technical, and behavioral indicators to determine each area's probability of outperforming the other categories.

  • Assets classes are weighted relative to corresponding benchmarks.

When Market Risks Become Extraordinarily High - Reduce Your Portfolio Risk

  • The model remains fully invested unless the Ned Davis Research Catastrophic Sell Stop (CSS) model is triggered, whereupon the areas which underperform during periods of market stress are trimmed.

  • The NDR Catastrophic Sell Stop model combines time-tested, objective indicators designed to identify periods of high risk for the broad financial markets. The model uses price-based, breadth, deviation from trend, fundamental, economic, interest rate, behavioral and volatility-based indicator composites.

When Market Risks Return To Normal — Put Your Money Back To Work

  • When the NDR Catastrophic Sell Stop model moves back to bullish levels, indicating lower risk, the strategy will reverse toward being fully invested.

Day Hagan/Ned Davis Research Smart Sector® Strategies

U.S. Exposure =

Day Hagan/Ned Davis Research Smart Sector®
with Catastrophic Stop

  • Overweight/underweights the 11 major U.S. equity sectors based on Ned Davis Research’s proprietary sector modeling.

  • Utilizes sector-specific composites of fundamental, economic, technical, and behavioral indicators to determine each sector’s probability of outperformance.

  • Incorporates NDR Catastrophic Stop Model as a risk overlay, raising cash when risks are deemed excessive.

International Exposure =

Day Hagan/Ned Davis Research Smart Sector®
International ex-U.S.

  • Overweight/underweight largest non-U.S. equity markets using fundamental, economic, technical, and behavioral indicators (8 positions).

  • Seeks to explore opportunities in smaller markets using a technical ranking system (6 positions).

  • Combines three NDR quantitative investment strategies: NDR Core International, NDR Explore International, and NDR Catastrophic Stop.

  • Uses NDR Catastrophic Stop as risk overlay.

Fixed Income Exposure =

Day Hagan/Ned Davis Research Smart Sector®
Fixed Income

  • Overweight/underweights among 8 fixed income sectors based on NDR’s proprietary modeling.

  • Sectors include U.S. Long-Term Treasury, U.S. Investment Grade Corporate, U.S. Mortgage-Backed Securities, International IG Bonds, TIPS, U.S. High-Yield, Emerging Market Bonds, U.S. Floating Rate Notes, and Short-Duration Treasury.

  • Evaluates macroeconomic, behavioral, credit, currency, and technical indicators to determine relative attractiveness.

  • Uses NDR Catastrophic Stop as risk overlay.

Powered by Ned Davis Research: See the Signals

How the Catastrophic Stop Model Works for Each Strategy?

U.S. Exposure =

Day Hagan/Ned Davis Research Smart Sector®
with Catastrophic Stop

Catastrophic Stop Sell Signal:

  • All holdings may be reduced by up to 50% until the model reverses back to a buy signal.

  • On the buy signal, allocation will reverse toward being a fully invested position.

International Exposure =

Day Hagan/Ned Davis Research Smart Sector®
International ex-U.S.

Catastrophic Stop Sell Signal:

  • All holdings may be reduced by up to 50% until the model reverses back to a buy signal.

  • On the buy signal, allocation will reverse toward being a fully invested position.

Fixed Income Exposure =

Day Hagan/Ned Davis Research Smart Sector®
Fixed Income

Catastrophic Stop Sell Signal:

  • Fixed-income sectors with a high correlation to equities may be reduced by 50%.

  • These sectors include High Yield, Emerging Market Bond, U.S. Investment Grade Corporates, and Floating Rate Notes.

  • On the buy signal, allocations moved back to previously recommended positions.

Disclosures

All investment strategies have the potential for profit or loss. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client’s portfolio. There is no assurance that the strategy will achieve its investment objectives. Increased portfolio turnover may result in higher brokerage commissions, dealer mark-ups, and other transaction costs and may result in taxable capital gains. Past performance is no guarantee of future results.