ARMR Advanced 6.68% During August
During the month of August 2020, the Armor US Equity Index ETF’s (ARMR) returned 6.68% (on a price basis) compared with a return of 7.01% for the S&P 500.
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 August
The equity market continued to rally during the month of August, aided by continued Fed stimulus and implicit signaling that interest rates will remain low for the foreseeable future.
Cyclical sectors, such as Consumer Discretionary and Industrials, performed strongly during August’s market advance. The Consumer Discretionary sector includes many of the stocks that have benefited from changing consumer behavior during the pandemic, most notably, Amazon.com. ARMR was overweight these sectors versus the S&P 500, which helped performance.
The fund also held an overweight position in the outperforming Communication Services sector.
Technology stocks continued their strong run during August. However, the fund’s weighting in this sector was lower than that of the S&P 500, which led to modest underperformance of the sector exposure relative to the S&P 500.
Additionally, defensive sectors such as Utilities and Consumer Staples, underperformed the overall market. The fund had an overweight position in these sectors relative to the S&P 500 during August.
Sector Positioning for September
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.
Moving into September, ARMR will be eliminating its position in Utilities and will be adding positions in the Financial Services and Real Estate sectors.
As we move into September, uncertainties abound in the market and overall economy. Will we get a second wave of coronavirus this Fall/Winter? Will we continue to see unemployment remain at historically high levels? Will we get increased market volatility as we hold a national election in early November? Like everyone else, we don’t know how these uncertainties will play out. However, we believe that the Armor US Equity Index ETF is uniquely positioned to benefit from a continued rise in the equity market, should that happen, while at the same time providing investors with downside risk management should the uncertainties noted above (or others) result in a prolonged downturn in the market. To that end, we believe ARMR offers the best of both worlds!
With the September reallocation, the fund will hold positions in 9 of the 11 S&P 500 sectors. Thus, we believe ARMR will have the defensive tilt needed to weather the economic and market uncertainties, while still allowing for participation if the market continues to advance.