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Day Hagan Smart Sector® International Strategy Update August 2025 (pdf)

Executive Summary

Global Equity Performance: A Regional Snapshot

July was a telling month for global investors, as regional divergences in central bank policy and underlying economic momentum became increasingly impactful on relative currency moves. The U.S. dollar reached its trough on July 1, and the subsequent rally into the end of the month reduced international equity returns (in U.S. dollar terms).

Globally, central bank policy was broadly accommodating, though the degree of “easing mode” varied across regions. In Australia, the Reserve Bank (RBA) left its cash rate unchanged at 3.85% after prior cuts, signaling a “wait-and-see” approach to allow the prior easing to take effect, but alluding to more rate reductions ahead as inflation moderates. Similarly, Canada’s central bank paused at 2.75%, having already delivered substantial cuts since mid-2024, and markets anticipate further easing if the economy softens. China adopted a distinctly pro-growth stance, unveiling a 10-point monetary package that included reserve requirements and rate cuts aimed at bolstering liquidity, sentiment, and long-term growth. This approach emphasized a “moderately accommodative” policy for the second half.

In Europe, the European Central Bank (ECB) concluded a series of eight cuts, holding rates steady at 2.15% in July while remaining data-dependent, signaling a neutral, paused position following recent accommodation. Germany, being part of the eurozone, adopted this policy stance, benefiting from a lower ECB main refinancing rate. France and Germany thus stood at the threshold of further easing, closely watching inflation and growth data.

Japan’s Bank of Japan, meanwhile, maintained its policy rate at 0.5%, remaining cautious. It reaffirmed a slow approach to tightening, emphasizing flexibility and caution due to global trade uncertainties and persistent inflation, but stopped short of additional stimulus in July. In Switzerland, the SNB was in explicit easing mode, lowering its policy rate to 0% in late June to counter currency strength and stagnant inflation.

The U.K. continued gradual easing, with the Bank of England having cut four times over the past year and holding at 4.25% in July. Guidance remained dovish, with markets expecting further cuts by year-end in the face of soft growth and easing inflation pressure.

PMI data painted a nuanced picture of current activity. Australia’s PMIs showed subdued expansion, restrained by weak consumer spending but buoyed by stabilizing commodity demand. Canada’s PMI rebounded into modest expansion territory on the back of job gains and resilience in services. China’s official manufacturing PMI remained slightly in contraction, with new orders and export demand soft, while services were in tepid expansion, mirroring the country’s policy urgency.

France and Germany’s July PMIs highlighted the eurozone's fragility, as both countries posted composite numbers around the 50 threshold, with services expanding modestly but manufacturing lagging behind. German and French business climate indicators showed improving sentiment but still pointed to sluggish industrial activity. Japan’s PMIs signaled continued expansion, particularly in services, as domestic demand proved resilient and supportive policies remained in place. Switzerland’s PMIs reflected export headwinds from U.S. tariffs, with manufacturing stagnating but services steadier. The U.K. registered a drop in composite PMI, weighed down by industrial softness despite recovering job markets.

The Citigroup Economic Surprise Index further revealed directional themes. Australia’s index declined, reflecting recent economic weakness. Canada’s index surprised to the upside in July, buoyed by a strong labor market and better-than-expected growth releases. China’s surprise index declined, indicating that stimulus measures and industrial policy were not having the hoped-for positive impact. By contrast, the Eurozone, including France and Germany, saw the surprise index increase, a sign of better-than-expected results.

Japan was a bright spot, as its surprise index moved higher, reflecting steadily improving outcomes relative to expectations and aligning with robust earnings revisions and equity performance.

Collectively, these data underscore a world where policy and growth leadership are shifting. Easing by central banks in Australia, Canada, China, Switzerland, and the U.K. provided a positive backdrop, but the benefits were uneven and closely tied to the region’s data momentum. PMI and surprise index readings provided essential caution against overly bullish interpretations, highlighting both the resilience and vulnerability in the global equity landscape for July 2025.

Conclusion

For 2026, the OECD projects global GDP growth of 2.9%, with notable regional variations. Australia is expected to grow by 1.9%, Canada by 1.3%, China by 4.3%, France by 1.3%, Germany by 1.3%, Japan by 0.7%, Switzerland by 1.2%, and the U.K. by 1.0%. Compared to 2025, most regions see modest improvement or stabilization, with Australia, Canada, France, and Germany benefiting from stronger investment and private consumption, while China’s growth moderates but remains robust among major economies (outside of India, at 6.5%). Persistent trade tensions, including U.S. tariffs (10% baseline, up to 50% reciprocal rates), and policy uncertainty pose key global headwinds, with inflationary pressures easing but remaining above pre-pandemic levels in several economies. Central banks are expected to maintain mostly accommodative or neutral policies, adjusting to incoming data and evolving trade dynamics.

Holdings

Core: Developed Market Positions (approximately 65% of equity holdings)

Explore: Emerging Market Positions (approximately 35% of equity holdings)

Sweden
Netherlands
Brazil
Chile
India

Position Details

Core: Developed Market Commentary

Approximately 65% of the strategy is allocated across eight of the largest markets in the ACWI ex-U.S. Index. The fund overweights and underweights the largest non-U.S. equity markets based on macro, fundamental, behavioral, and technical indicators.

Australia: Australia’s composite model remains neutral. Measures of technical trends, interest rate differentials, and relative volatility are bullish. The trend in gold is now rated neutral. Valuations are also neutral, and downside volatility is elevated. We remain neutral.

Commentary: The Australian dollar edged higher last Friday, July 31, 2025, halting a period of downward pressure, as Australia secured the lowest U.S. tariff rate of 10% under President Trump’s revised executive order. This stability stemmed from Australia’s trade surplus with the U.S. and diplomatic efforts, which helped avoid the higher tariffs imposed on other nations, ranging from 15% to 41%. However, the U.S. dollar remained resilient despite mixed U.S. jobs data, limiting the Australian dollar’s gains. Australia’s GDP growth is projected at 1.6% for 2025, rising to 1.8% in 2026, according to IMF and OECD forecasts, tempered by global trade disruptions and U.S. tariffs. Growth is supported by easing monetary policies and a gradual recovery in domestic demand following a period of stagnation. The Reserve Bank of Australia (RBA) is pursuing a cautious easing path, with the cash rate at 4.1% in July 2025 after a cut in June, and further reductions anticipated in response to subdued inflation (projected at 2.5-3%) and global economic uncertainties. The Citigroup Economic Surprise Index for Australia remained negative in July, reflecting stable but unremarkable economic data releases. Earnings growth forecasts are modest, driven by improvements in consumption, housing investment (up 13.9% in 2024-25), and business spending, with valuations aligning with historical averages. Overall, Australia’s economic outlook suggests gradual expansion amid global challenges, with trade advantages providing some resilience.

Figure 1: A new uptrend in gold prices would be bullish for Australia’s stock market. — **Figure 1:** A new uptrend in gold prices would be bullish for Australia’s stock market.

Canada: Canada’s composite model remains neutral. Measures of trend, profitability (ROE), and relative currency strength are supportive. Mean reversion, leading economic indicators, and relative valuations (to the rest of the world) are negative.

Commentary: The S&P/TSX Composite advanced in July 2025, reaching a record high of 27,554.54 on July 30, driven by robust corporate earnings in technology and energy sectors, stable commodity prices (e.g., oil at $67.44/barrel, gold at $3,362.30/ounce), and resilient economic sentiment despite tariff uncertainties. Preliminary data suggested a 1.6% rise in nominal retail sales in June, supporting expectations of a modest GDP rebound after a 0.1% contraction in May, which informed the Bank of Canada’s decision to hold the policy rate at 2.75% on July 30. However, these positive factors were tempered by looming U.S. tariffs effective August 1. The Canadian dollar weakened to 72.53 U.S. cents by August 1, pressured by the unchanged Canadian rate, a projected 1.5% GDP contraction in Q2, and U.S. dollar strength. The U.S. dollar rose, supported by the Federal Reserve’s steady rates (4.25%–4.50%) and solid U.S. Q2 GDP growth (2.5% annualized). Investors adopted dollar-carrying strategies amid uncertainty over U.S.-Canada trade relations, particularly with Trump’s 35% tariff threat on non-CUSMA-compliant Canadian goods, further weighing on the Canadian dollar. The S&P Global Canada Manufacturing PMI fell to 46.1 in July, reflecting ongoing declines in factory activity due to trade uncertainties and tariff concerns. Contractions in output and new orders led to reduced staffing and purchasing, with similar trends persisting into May, signaling challenges for Canada’s industrial sector.

**Figure 2:** An increase in Canada’s relative earnings yield would indicate that investors are assigning a higher multiple to the region, indicating growing demand and confidence. We’re looking for the short-term MA (10 days) to cross above the longer-term MA (160 days).

China: China’s composite model declined in August, with indicators suggesting a slowdown in manufacturing activity and shorter-term technical indicators also turning negative. We are neutral.

Commentary: The offshore Chinese yuan weakened recently, reflecting trade uncertainties, after U.S. President Trump announced a 10% baseline global tariff on April 5, 2025, with reciprocal duties of 11%–50% on 57 countries starting April 9. A 40% tariff targets goods transshipped through third countries to evade duties. The U.S. and China held trade talks in Stockholm, with Treasury Secretary Scott Bessent expressing cautious optimism about extending the August 12 tariff truce, under which U.S. tariffs on China are 30% and China’s on U.S. goods are 10%. In China, manufacturing contracted in July, with the NBS PMI at 49.5, driven by declining exports, weak domestic demand, and disruptions like floods. GDP growth forecasts for 2025 are 4.0%–4.1% (IMF/OECD), moderating to 3.7% in 2026 due to trade tensions and soft consumption. Targeted policies, including rate cuts and infrastructure spending, aim to boost liquidity, with positive economic data surprises indicating resilience in some sectors. The SSE Composite forward P/E is approximately 13.2x.

Figure 3: Relative price momentum on the cusp of a buy signal. — **Figure 3:** Relative price momentum on the cusp of a buy signal.

France: The Composite model remains underweight. Technical indicators calling short-term relative trends, breadth, and momentum are negative. Leading economic indicators are neutral. The lone positive is relative valuation, but until we see model improvement, we will remain with an underweight allocation relative to the benchmark.

Commentary: Europe has avoided severe U.S. trade measures but faces a 15% tariff on select exports. In June, France’s INSEE manufacturing climate indicator fell to 94, likely continuing into July, reflecting weak foreign order optimism due to trade uncertainties and marking a decline from May’s 97, below the long-term average of 100. Economic forecasts project France’s GDP growth at 0.9%–1.0% in 2025, driven by fiscal tightening, U.S. tariffs, and subdued investment, with growth expected to rise to 1.3%–1.5% in 2026 as consumption and investment recover. Inflation remains moderate at 2.4%, and the labor market is stable with unemployment at 7.7%. Earnings growth for French firms is muted, with flat revisions due to weak domestic demand and export challenges from tariffs. The CAC 40’s forward price-to-earnings ratio is approximately 16.7x, slightly above historical averages, reflecting cautious market expectations amid ongoing uncertainty.

Figure 4: France continues to see outflows. — **Figure 4**: France continues to see outflows.

Germany: Following Germany’s massive gains through June, we reduced exposure at the beginning of July, which proved beneficial, as the DAX declined by over 2% in July. Indicators are currently mixed, with intermediate-term breadth, relative valuations, and improving manufacturing confidence, indicating a constructive outlook. ETF outflows and MACD indicators are negative, as is euro weakness. We are increasing exposure from underweight to neutral.

Commentary: Germany’s GDP growth forecast for 2025 is modest, projected at 0.5%–0.7%, signaling a slow recovery from recent weakness, with growth expected to accelerate to 1.2%–1.5% in 2026, driven by increased government spending on infrastructure (€80 billion) and defense (€53 billion), alongside tax relief measures. Short-term challenges persist, including a 15% U.S. tariff on select exports (effective April 5, 2025) and a 3.3% export contraction impacting industrial production. The Citigroup Economic Surprise Index shows mixed trends, with disappointing manufacturing data (PMI at 49.1) reflecting weak conditions. However, the Ifo Business Climate Index rose to 86.5 in July, indicating cautious improvement in business sentiment. Earnings growth forecasts for German companies remain conservative but are stabilizing, supported by fiscal measures and steady domestic demand, with flat to slightly positive revisions. The DAX’s forward price-to-earnings ratio is approximately 14.2x, aligning with historical averages and reflecting moderate valuations. Overall, market participants expect a gradual economic and corporate earnings recovery, while monitoring global trade dynamics and policy shifts. In Q2 2025, the economy contracted by 0.1%, marking the first decline since Q2 2024.

Figure 5: Germany’s relative valuation (based on dividend yield) is extended. — **Figure 5:** Germany’s relative valuation (based on dividend yield) is extended.

Japan: Japan’s composite model remains bullish. Measures of relative short-term trend, valuations, forward earnings growth, and investor sentiment reversing from levels of extreme pessimism are bullish. We are overweight.

Commentary: The S&P Global Japan Manufacturing PMI fell to 48.9 in July, down from 50.1 in June, marking the first contraction in 13 months and the lowest level since April. This decline, driven by reduced output and weak demand amid U.S. tariff uncertainties (15% on Japanese goods, effective July 23), reflects cautious business sentiment. New orders, including exports, continued to decline, with export orders falling for the 41st consecutive month due to trade tensions impacting semiconductors and machinery. Conversely, the S&P Global Japan Services PMI rose to 53.5 from 51.7, marking the fourth consecutive month of growth, driven by strong domestic demand, though employment growth slowed due to labor shortages. The Bank of Japan maintained its benchmark short-term rate at 0.5% during its July meeting, keeping borrowing costs at their highest level since 2008, in line with market expectations amid balanced inflation (2.2%) and trade challenges.

Figure 6: Sentiment is reversing from extreme pessimism levels. This is constructive. — **Figure 6:** Sentiment is reversing from extreme pessimism levels. This is constructive.

Switzerland: The Swiss composite model has improved but is still negative on balance. Relative price momentum has been very weak but is registering significant oversold levels. Relative breadth is neutral but also could be interpreted as oversold. Relative valuations and policy rates are bullish. We are increasing exposure but remain underweight. A decisive reversal from the previously mentioned oversold extremes would allow us to increase exposure.

Commentary: Switzerland’s GDP growth forecasts for 2025 are modest, estimated at 1.2%–1.4%, with growth stable or slightly higher at 1.2%–1.6% in 2026, below the long-term average of 1.8%. This subdued outlook reflects global demand weaknesses and export challenges, intensified by a 15% U.S. tariff on Swiss goods (effective July 23, 2025). Domestic demand, driven by consumer spending, provides some support, but external pressures persist. The Citigroup Economic Surprise Index indicates disappointing economic surprises, tied to export struggles and rising global trade tensions. Earnings growth expectations for Swiss companies are cautious, with flat revisions reflecting uncertainty over trade policies. Defensive sectors, such as pharmaceuticals and consumer staples, outperform export-reliant sectors like machinery. The SMI’s forward price-to-earnings ratio is approximately 15.8x, aligning with historical averages and reflecting Switzerland’s defensive market nature. In June 2025, the Swiss National Bank cut its policy rate to 0% to address low inflation (0.1% in May) and a challenging global outlook. Consumer prices fell 0.1% year-on-year in May, the first decline since March 2021, with the SNB anticipating average inflation of 0.1% in 2025 and 0.6% in 2026. GDP growth was strong in Q1 2025 (2.0% annualized) but is expected to moderate due to fading export momentum.

Figure 7: Momentum has been exceedingly weak but is at levels historically consistent with major turns. — **Figure 7:** Momentum has been exceedingly weak but is at levels historically consistent with major turns.

United Kingdom: The UK composite model has improved slightly with the August update, but the aggregate level remains below 50% (100% = maximum bullish). Technical indicators are mixed (trend negative, but short-term momentum improving). The British Pound was under pressure for most of the month and is rated negative. We are increasing our position due to model improvements but remain underweight overall.

Commentary: The U.K.’s GDP growth outlook for 2025 is moderate, projected at 1.0%–1.2%, with growth expected to rise to 1.3%–1.7% in 2026, driven by anticipated rate cuts and consumer spending, despite challenges from trade tensions, fiscal tightening, and wage growth (3.5%). The Citigroup Economic Surprise Index indicates mixed economic signals, with recent data underperforming expectations due to sluggish industrial activity and global uncertainties, including a 15% U.S. tariff on select exports. Earnings growth predictions are cautiously optimistic, with flat revisions in export- and investment-sensitive sectors due to weak business investment (down 3.2% in Q4 2024). The MSCI U.K. equity market’s forward price-to-earnings ratio is approximately 13.8x, reflecting moderate valuations aligned with subdued profit growth expectations. In July, the S&P Global U.K. Manufacturing PMI was 48, signaling ongoing contraction driven by trade pressures. Conversely, the S&P Global U.K. Services PMI rose to 51.2, supported by domestic demand, though tempered by geopolitical concerns. Despite these challenges, businesses express cautious optimism about growth prospects over the coming year, bolstered by expected monetary easing.

Figure 8: Trend improvement indicates growing investor interest. — **Figure 8:** Trend improvement indicates growing investor interest.

Emerging Market Positions

Approximately 30% of the strategy is allocated across five markets from a pool of more than 20 smaller markets. Selection is based on a multifactor technical ranking system using trend and mean reversion indicators. The process seeks to identify oversold opportunities within the global equity markets that are likely to mean-revert from lower levels and exhibit mild pullbacks from long-term uptrends.

Current Holdings:

Sweden
Netherlands
Brazil
Chile
India

Explore: Emerging Market Commentary

Sweden: Sweden’s GDP growth forecast for 2025 is projected at 0.9%–1.1%, reflecting global trade disruptions and weak domestic demand, with a stronger recovery to 1.6%–2.6% in 2026, driven by fiscal stimulus and rising consumption (European Commission, SEB). The Citigroup Economic Surprise Index remains near neutral, indicating data broadly in line with expectations amid a sluggish recovery. Earnings growth forecasts for Swedish firms are cautious but stable, with modest upward revisions as fiscal measures (SEK 75 billion in 2025 reforms) and lower interest rates support demand. The MSCI Sweden forward price-to-earnings (P/E) ratio is approximately 15x, aligning with historical averages and reflecting steady but muted profit expectations (Bloomberg). Overall, earnings forecasts suggest a gradual recovery tempered by trade and geopolitical risks.

Netherlands: The Netherlands is projected to grow at 1.2%–1.3% in 2025, slowing slightly to 1.2% in 2026, supported by strong private consumption and wage growth (over 6% in 2024), despite U.S. tariffs impacting exports (European Commission). The Citigroup Economic Surprise Index shows modest positive surprises, reflecting better-than-expected data in consumption and services. Earnings growth forecasts for Dutch companies are cautiously optimistic, with gradual upward revisions in consumer and technology sectors, though export-sensitive sectors like steel face challenges. The MSCI Netherlands forward P/E ratio is approximately 16.5x, consistent with fair valuations balancing growth and trade uncertainties (Bloomberg). Earnings revisions remain stable, with cautious optimism amid global risks.

Brazil: Brazil’s GDP is expected to grow at 1.6%–2.2% in 2025, stabilizing at 1.8%–2.0% in 2026, driven by rising commodity prices and domestic consumption, despite fiscal and tariff challenges (OECD, IMF). The Citigroup Economic Surprise Index has been volatile, reflecting mixed data amid political uncertainty and a 50% U.S. tariff. Earnings growth forecasts for Brazilian firms show mild upgrades in resources (e.g., oil, soybeans) and consumer sectors but caution in industrials due to high interest rates (12.25%). The MSCI Brazil forward P/E ratio is approximately 7.5x–8x, reflecting discounted valuations due to currency (27% real depreciation) and policy risks (Bloomberg). Earnings revisions are mixed, with cautious growth prospects as reforms and inflation dynamics evolve.

Chile: Chile’s GDP growth outlook is projected at 2.0%–2.2% for 2025, rising to 2.2%–2.5% in 2026, supported by copper exports and fiscal stimulus, despite global demand weakness (IMF, ECLAC). The Citigroup Economic Surprise Index shows moderate positive readings, with export data occasionally outperforming expectations (X posts). Earnings growth forecasts are improving, particularly in mining and infrastructure, with cautious upward revisions. The MSCI Chile forward P/E ratio is approximately 12x, reflecting balanced expectations tempered by external demand and domestic policy uncertainty (Bloomberg). Overall, earnings forecasts indicate a steady recovery amid global and local challenges.

India: India’s GDP growth remains robust, forecasted at 6.8%–7.0% for 2025 and 6.5%–6.6% for 2026, driven by strong domestic demand, infrastructure investment, and policy reforms (IMF, Visual Capitalist). The Citigroup Economic Surprise Index shows consistent positive surprises, reflecting outperformance in consumption and industrial activity. Earnings growth forecasts for Indian firms are strong, with upgrades in IT, financials, and consumer sectors. The MSCI India forward P/E ratio is approximately 22x, reflecting premium valuations for high growth potential, balanced against global trade risks (Bloomberg). Earnings revisions trend positively, underscoring sustained optimism in corporate profitability and economic expansion.

Catastrophic Stop Model

The Catastrophic Stop model combines time-tested, objective indicators designed to identify high-risk periods for the equity market. The model entered August recommending a fully invested equity allocation relative to the benchmark.

The Day Hagan Catastrophic Stop Model currently stands at 72.7%, indicating investors should maintain their benchmark equity exposure. Technical indicators are mixed, with longer-term trend signals still bullish but short-term indicators showing overbought conditions. Sentiment is extremely optimistic, yet institutional positioning remains neutral. The model suggests a likely short-term consolidation phase before the market potentially resumes its upward trend. Should conditions continue to deteriorate, the model is poised to objectively signal a reduction in equity exposure.

The weight of the evidence suggests that the recent weakness is not expected to extend into a significant downtrend. Of course, if our model flips negative (below 40% for two consecutive days), signaling more substantial problems, we will raise cash immediately.

Figure 9: The Catastrophic Stop model recommends a fully invested equity position (relative to the benchmark). Due to the use of indices to extend model history, the model is considered hypothetical. — **Figure 9:** The Catastrophic Stop model recommends a fully invested equity position (relative to the benchmark). Due to the use of indices to extend model history, the model is considered hypothetical.

The Day Hagan Daily Market Sentiment Composite remains in the excessive optimism zone. With sentiment indicators, we go with the flow until it reaches an extreme and reverses. In other words, we will rate this indicator as neutral until it reverses back below 70.

Figure 10: S&P 500 Index vs. Day Hagan Daily Market Sentiment Composite. — **Figure 10:** S&P 500 Index vs. Day Hagan Daily Market Sentiment Composite.

This strategy utilizes measures of price, valuation, economic trends, monetary liquidity, and market sentiment to make objective, rational, and unemotional decisions about how much capital to place at risk and where to allocate that capital.

For more information, please contact us at:

Day Hagan Asset Management
1000 S. Tamiami Trl
Sarasota, FL 34236
Toll Free: (800) 594-7930
Office Phone: (941) 330-1702

Website: https://dayhagan.com or https://dhfunds.com

This material is for educational purposes only. Further distribution is prohibited without prior permission. Please see the information on Disclosures and Fact Sheets here: https://dhfunds.com/literature. Charts with models and return information use indices for performance testing to extend the model histories, and they should be considered hypothetical. All Rights Reserved. (© Copyright 2025 Day Hagan Asset Management.)

Day Hagan Smart Sector® International ETF

Symbol: SSXU

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Strategy Description

The Smart Sector® International strategy combines three quantitative investment strategies: Core International, Explore International, and Catastrophic Stop.

The Process Is Based On The Weight Of The Evidence

Core Allocation

The fund begins by overweighting and underweighting the largest non-U.S. equity markets based on proprietary models.
Each of the models utilizes market-specific, weight-of-the-evidence composites of fundamental, economic, technical, and behavioral indicators to determine each area’s probability of outperforming the ACWI, for example. U.S. Markets are weighted accordingly relative to benchmark weightings.

Explore Allocation

To select smaller markets, the fund uses a multi-factor technical ranking system to choose the top markets. The markets with the highest rankings split the non-core model allocation equally.

When Market Risks Become Extraordinarily High — Reduce Your Portfolio Risk

The model remains fully invested unless the Catastrophic model is triggered, whereupon the equity-invested position may be trimmed by up to 50%.
The Catastrophic Stop model combines time-tested, objective indicators designed to identify periods of high risk for the broad U.S. equity market. 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 Catastrophic Stop model moves back to bullish levels, indicating lower risk, the strategy will reverse toward being fully invested.

Disclosures

The data and analysis contained within are provided "as is" and without warranty of any kind, either express or implied. The information is based on data believed to be reliable, but it is not guaranteed. Day Hagan DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OR USE. All performance measures do not reflect tax consequences, execution, commissions, and other trading costs, and as such, investors should consult their tax advisors before making investment decisions, as well as realize that the past performance and results of the model are not a guarantee of future results. The Smart Sector® Strategy is not intended to be the primary basis for investment decisions and the usage of the model does not address the suitability of any particular in Fixed Income vestment for any particular investor.

Using any graph, chart, formula, model, or other device to assist in deciding which securities to trade or when to trade them presents many difficulties and their effectiveness has significant limitations, including that prior patterns may not repeat themselves continuously or on any particular occasion. In addition, market participants using such devices can impact the market in a way that changes the effectiveness of such devices. Day Hagan believes no individual graph, chart, formula, model, or other device should be used as the sole basis for any investment decision and suggests that all market participants consider differing viewpoints and use a weight-of-the-evidence approach that fits their investment needs.

Past performance does not guarantee future results. No current or prospective client should assume future performance of any specific investment or strategy will be profitable or equal to past performance levels. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals and economic conditions may materially alter the performance of your portfolio. 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. Historical performance results for investment indexes and/or categories generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment management fee, the incurrence of which would have the effect of decreasing historical performance results. There can be no assurances that a portfolio will match or outperform any particular benchmark.

Day Hagan Asset Management is registered as an investment adviser with the United States Securities and Exchange Commission. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.

There may be a potential tax implication with a rebalancing strategy. Re-balancing involves selling some positions and buying others, and this activity results in realized gains and losses for the positions that are sold. The performance calculations do not reflect the impact that paying taxes would have, and for taxable accounts, any taxable gains would reduce the performance on an after-tax basis. This reduction could be material to the overall performance of an actual trading account. Day Hagan does not provide legal, tax or accounting advice. Please consult your tax advisor in connection with this material, before implementing such a strategy, and prior to any withdrawals that you make from your portfolio.