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ARMR June 2020 Recap

July 2, 2020

During the month of June 2020, the Armor US Equity Index ETF’s (ARMR) performance of 1.80% (on a price basis) was in line with the S&P 500’s advance of 1.84%.[1]

Performance to the most recent month-end can be found by clicking here. Performance data quoted represents past performance and is no guarantee of future results.

Performance Drivers During June
Helping performance during the month of June was the fund’s allocations to the Technology and Consumer Discretionary sectors, both of which outperformed the S&P 500 during the month. Many stocks in these sectors, such as companies that facilitate work-from-home and online retail, were beneficiaries as large swaths of the population were still under stay-at-home orders. It is expected that the work and shop from home trends, which were already manifesting themselves before the pandemic, will continue and potentially accelerate as lockdown orders are gradually lifted.

ARMR uses an equal weight strategy for the sectors that it holds each month. For the month of June, ARMR had six holdings which means each holding received an allocation of a little more than 16% to begin the month. ARMR’s best performing sector for the month was its Technology holding which outperformed the S&P 500 by 5.20%. On a market weight basis, Technology accounts for 26% of the S&P 500. With that said, ARMR’s Technology holding of roughly 16% put it underweight relative to a market-weight of 26% for the S&P 500. While Technology performed well, if it had been a larger portion of the fund’s holdings in June, it would have added even further to performance. Conversely, ARMR’s second best performing sector of the month was its holdings in Consumer Discretionary as the sector outperformed the S&P 500 by 3.65%. Consumer Discretionary has a market weight of 11% in the S&P 500; therefore, ARMR’s allocation of just over 16% put its Consumer Discretionary holdings in an overweight position relative to the S&P 500 creating outsized performance on a relative basis to the S&P 500. Additionally, the Materials sector outperformed the S&P 500 by 0.11% in June. On a market-weight basis, the Materials sector accounts for 3% of the S&P 500. ARMR’s roughly 16% exposure to Materials put its Materials holdings in an overweight position relative to the S&P 500, and therefore was a benefit to the fund for the month of June.

Hurting performance in June were ARMR’s allocations to the Communications, Consumer Staples, and Healthcare sectors, as these sectors underperformed the S&P 500. These sectors are more defensive in nature, e.g., they tend to perform better when investors are concerned about the overall economy. As the US economy, at least right now, seems to have escaped a worst-case scenario, these stocks have given back some of their earlier gains.

Sector Positioning for July
The index which underlies the ARMR ETF uses a proprietary Market Performance Indicator (MPI) to estimate which sectors may offer strong, long-term performance potential with lower expected downside risk. The MPI uses a sector’s moving average price as a basis for this factor. When a sector is trading above (below) its moving average, it is included (excluded) in the index.

ARMR will sell out its Consumer Staples allocation for the July rebalance. Defensive stocks, such as Consumer Staples, have been weak performers during June and the second quarter as investors appear to be discounting a rapid economic recovery. The sector’s weak performance during June pushed its price below its MPI.

The fund will retain its allocation to Communication Services, Consumer Discretionary, Healthcare, Information Technology, and Materials.

Summary
ARMR performed in line with the S&P 500 during June. Moving forward, the upcoming Presidential election, the recent rise in coronavirus cases in the U.S., the slowing down of reopening plans, and economic uncertainty associated with the current recession may increase market volatility. As a result, we believe that an allocation to a defensive sector rotation strategy is prudent.

The Armor US Equity Index ETF (ARMR) may provide investors with an attractive defensive equity portfolio.

The outbreak of COVID-19 has negatively affected the worldwide economy, individual countries, individual companies and the market in general. The future impact of COVID-19 is currently unknown, and it may exacerbate other risks that apply to the Fund. Short-term performance may often reflect conditions that are likely not sustainable, and thus such performance may not be repeated in the future.


[1] Source: Yahoo Finance

Carefully consider the Fund’s investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Fund’s prospectus and Summary Prospectus, which may be obtained by visiting https://armoretfs.com/documents. Read the prospectus and Summary Prospectus carefully before investing.

Foreside Fund Services, LLC, distributor.

Investing involves risk, including possible loss of principal. The Fund’s return may not match or achieve a high degree of correlation with the return of the Index. To the extent the Fund’s investments are concentrated in or have significant exposure to a particular issuer, industry or group of industries, or asset class, the Fund may be more vulnerable to adverse events affecting such issuer, industry or group of industries, or asset class than if the Fund’s investments were more broadly diversified. Issuer-specific events, including changes in the financial condition of an issuer, can have a negative impact on the value of the Fund.

A new or smaller fund is subject to the risk that its performance may not represent how the fund is expected to or may perform in the long term. In addition, new funds have limited operating histories for investors to evaluate and new and smaller funds may not attract sufficient assets to achieve investment and trading efficiencies.

Shares are bought and sold at market price (closing price) not net asset value (NAV) and are not individually redeemed from the Fund. Market price returns are based on the midpoint of the bid/ask spread at 4:00pm Eastern Time (when NAV is normally determined) and do not represent the return you would receive if you traded at other times.