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The point is that the market dynamics have been dominated by the potential impact of future Trump pro-business
policies. This is understandable as the U.S. economy has
staggered along for many years with increasing regulations and a dearth of policies that have the potential to
create a favorable business environment. After the U.S.
% of NAV
Equities
Horizons S&P/TSX 60 Index ETF
HUZ
Commodities
Horizons Silver ETF
43.6%
4.0%
Equities
Horizons S&P 500 Index ETF
Horizons NASDAQ-100 Index ETF
iShares Russell 2000 ETF
Consumer Discretionary Select Sector SPDR Fund
Financial Select Sector SPDR Fund
15.3%
15.0%
10.4%
5.3%
5.0%
-1.2%
2.8%
100.0%
** Reects gain / loss on currency hedge (Notional exposure equals 73.8% of current NAV)
The objective of HAC is long-term capital appreciation in all market cycles by tactically allocating its exposure
amongst equities, xed income, commodities and currencies during periods that have historically demonstrated seasonal trends. The Thackray Market Letter is for educational purposes and is meant to demonstrate the advantages of
seasonal investing by describing many of the trades and strategies in HAC.
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election, suddenly, investors were presented with a scenario where the White House could potentially introduce
a raft of policies that might stimulate the economy. This
is not a political commentary, but merely an analysis of
the situation.
Trumps policies are a huge gamble. Most pundits would
agree that his policies should help stimulate the economy in the short-term. Like many others, I doubt that the
U.S. will expand by Trumps target of 5% per year. The
problem is that his proposed policies will rack up huge
decits. If the policies do not stimulate the economy by
a large margin, there could be bigger problems down the
road. This situation is not on the near-term horizon and is
a topic of a future missive.
The Trump Eect is not going away anytime soon. The
discussion will shift, but it will still be about Trump.
Trumps inauguration is on January 20th. There is a good
chance that he will come out of the gates by talking about
all of the great things he is going to do, but how many
of them will get done, or watered down or delayed? Given
the polarization of the American people and media, there
is also a good chance that the Trumps eorts will be attacked before the traditional one-hundred day honeymoon
period ends. It is very dicult to predict what is going to
take place on this front, especially given Trumps nature.
Many investors are concerned that they have missed the
Trump rally in the S&P 500 and sectors that have outperformed in the expectation of Trumps pro-business
policies. Although the Trump rally has been sudden and
sharp, in the context of the large structural changes that
are being put forward, the rally is not that large. The S&P
500 has rallied 4.6% from U.S. election day to the end
of the year. After mediocre returns in the S&P 500 for
so quite some time, on a relative basis, the current rally
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sectors often take a reprieve in the rst two/thirds of January. The funds were rotated into broad market positions,
mainly the Canadian stock market. Consideration will be
given to entering back into some of the cyclical sectors
that start their seasonal periods later in January.
Seasonal Opportunities
To start the New Year, I am including a larger number of
sectors in the seasonal opportunities section.
Just before December month-end, HAC sold its positions in some of its cyclical sectors, including industrials,
homebuilders, metals and mining and materials. These
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Industrials
U.S. Materials
My Call: The metals and mining sector will probably
outperform the S&P 500 over the next three months,
but on a volatile basis. Look for this sector to nish its
seasonal run in late April.
Homebuilders
The homebuilders sector has been in a long-term consolidation pattern, albeit a volatile one, since 2015. It has
also been underperforming the S&P 500 in a similar time
frame. In December, the sector turned down once again,
as investors feared the consequences of higher interest
rates. The seasonal trade typically nishes in early February, but it looks like it is nishing early this year.
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Small Caps
My Call: The homebuilders sector will probably underperform the S&P 500 for the remainder of its seasonal
period.
Financials
The nancial sector has been the main beneciary of the
Trump Eect. After the 2007-2008 nancial crisis, the industry has been weighed down by extra regulation. A certain amount of regulation is needed to control the banks,
but some of the regulation is weighing on the sector.
Consumer Discretionary
Nasdaq-100
The Nasdaq-100 has performed well in its seasonal period which started mid-December. It has benetted from
its technology and biotech constituents performing well.
The consumer discretionary sector has been underperforming the S&P 500 since early 2016. The sector typically performs well from October 28th to April 23rd. Although the sector is still in a downtrend, recently it has
been showing signs of improving performance.
My Call: The consumer discretionary sector will probably improve its performance and outperform the S&P
500 in the remainder of its seasonal period.
Technology
My Call: The Nasdaq-100 will probably start to underperform immanently, as the technology sector and the
biotech sector will probably turn down.
Retail
The retail sector performed well in its seasonal period
from October 28th to November 29th. Shortly, afterwards
the sector corrected and has been correcting since.
The strongest seasonal period for the retail sector lasts
from January 21st to April 12th. The current correction
could set up a good technical position for the next seasonal period to perform well.
Initially, the technology sector underperformed the S&P
500 after the U.S. election. The sector generates a lot of
its revenues overseas, which does not make it a favorable
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Transportation
Silver
In my December newsletter I wrote about the possible opportunity to enter the silver bullion sector in the last few
days of December. The seasonal period for silver started
on seasonal cue.
My Call: The transportation sector will probably outperform in its seasonal period, particularly in March
which is one of the stronger months of the year for the
sector.
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Canadian Banks
Stocks
TJX
The seasonal period for the energy sector starts on February 25th. A correction before hand would set the sector up
to perform well in its seasonal period.
The next seasonal period for the Canadian banking sector
starts January 23rd.
My Call: The Canadian banking sector will probably
outperform in its seasonal period, but nish its seasonal
outperformance in late March.
Energy
My Call: United Technologies will probably moderately outperform the S&P 500 in its upcoming seasonal
period.
Eastman Chemical
United Technologies
United Technologies received a Trump Bump, but then
had a relative pull-back compared to the S&P 500. Relative to the S&P 500, United Technologies is still in a consolidation range. Technically, this is a good setup for its
seasonal period from January 23rd to May 5th.
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My Call: It looks like Eastman Chemical could be starting its seasonal period early as its relative performance
compared to the S&P 500 is starting to improve. Eastman Chemical will probably start its seasonal period
early and outperform the S&P 500 during its seasonal
period.
Disclaimer: Comments, charts and opinions oered in this report are produced by www.alphamountain.
com and are for information purposes only. They should not be considered as advice to purchase or to sell
mentioned securities. Any information oered in this report is believed to be accurate, but is not guaranteed.
Brooke Thackray is a Research Analyst with Horizons ETFs Management (Canada) Inc. (Horizons ETFs).
All of the views expressed herein are the personal views of Brooke Thackray and are not necessarily the views
of Horizons ETFs, or AlphaPro Management Inc., although any of the opinions or recommendations found
herein may be reected in positions or transactions in the various client portfolios managed by Horizons ETFs,
including the Horizons Seasonal Rotation ETF. Comments, opinions and views expressed are of a general
nature and should not be considered as advice to purchase or to sell mentioned securities. Horizons ETFs has
a direct interest in the management and performance fees of the Horizons Seasonal Rotation ETF (the ETF),
and may, at any given time, have a direct or indirect interest in the ETF or its holdings. Commissions, trailing
commissions, management fees and expenses all may be associated with an investment in the ETF which is
managed by Horizons ETFs Management (Canada) Inc. The ETF is not guaranteed, its values change frequently and past performance may not be repeated. The ETF may have exposure to leveraged investment techniques
that magnify gains and losses and which may result in greater volatility in value and could be subject to aggressive investment risk and price volatility risk. Such risks are described in the ETFs prospectus. The prospectus contains important detailed information about the ETF. Please read the prospectus before investing.
While the writer of this newsletter has used his best eorts in preparing this publication, no warranty with
respect to the accuracy or completeness is given. The information presented is for educational purposes and is
not investment advice. Historical results do not guarantee future results
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