ARMR Outperformed the S&P 500 During May 2020
During May 2020, the 8.90% price return of the Armor US Equity Index ETF (ARMR) outperformed the 4.53% return of the S&P 500 by 4.37%.
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 May
Helping performance during the month of May was the fund’s allocation to the Consumer Discretionary sector which outperformed the S&P 500 by 2.75% during the month. Optimism surrounding the gradual reopening of the US economy has fueled hopes of a turnaround for some of the sector’s hardest-hit names. A gradual lifting of lockdowns in some states has stirred hopes for a bounce-back for the retailers that make up much of the sector.
The fund was also helped by its allocation to the Information Technology and Communication Services sectors as these sectors outperformed the S&P 500 by 3.34% and 2.39%, respectively, during the month of May. Many stocks in these sectors were perceived as beneficiaries of the country’s lockdown. Companies in these sectors helped to facilitate remote workplace and education solutions as well as offered entertainment options. Additionally, such companies have the potential to continue to benefit even after the lockdowns are lifted as trends toward remote work, which were already in motion before the pandemic, may accelerate.
The fund’s allocation to the healthcare sector was a modest drag on performance during May as the sector underperformed the S&P 500 by -0.18%. The sector had performed strongly coming off of the March lows, so it is not surprising that there was some moderation in its performance relative to the S&P 500. Additionally, healthcare stocks are often viewed as defensive. With growing optimism, the market began to favor sectors and stocks with more direct exposure to the US economy.
Sector Positioning for June 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.
For June, we will be maintaining our allocation to the four sectors currently in the portfolio, namely, Communication Services, Consumer Discretionary, Healthcare, and Information Technology.
In addition, we will be adding allocations to the Materials and Consumer Staples sectors. Materials stocks tend to be cyclical in nature, e.g., they have historically performed well when the economy is improving. The recent lockdown has altered consumer spending patterns, favoring food and cleaning items and the retailers that sell them – the very stocks in the Consumer Staples sector. It is likely that many of these patterns may persist even after the lockdown is lifted.
Summary The fund outperformed the S&P 500 by 4.37% during the month of May. Given recent performance, coupled with the addition of the Materials and Consumer Staples sectors, we believe that the fund is attractively positioned to benefit from current market conditions and economic trends.
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.
 Source: Yahoo Finance