Nearly Two Months Since U.S. Equity Took the Number #1 Asset Class Ranking

We are roughly two months removed from seeing US Equity make its way back to the number one ranked asset class in the Nasdaq Dorsey Wright DALI (Dynamic Asset Level Investing) tool. This is the eighth time going back to 2000 that US Equity has been the number one ranked asset class. Out of the previous seven times, US Equity stayed in the number one rank for an average of 495 days and saw an average return of 11.66%. Interestingly enough, the shortest stay in the number one position for US Equity was just four days back in August 2003. That was right before International Equity and Commodities spent the next four and a half years taking turns at the top of the DALI rankings. The next shortest time in the number one positions for US Equity was September/October 2011. The final correction in 2011 kicked US Equity out of number one in early October; however, by the end of October 2011 US Equity had returned to number one for the next 1,568 days (or 4.3 years) and the S&P 500 Total Return TR.SPXX returned more than 62%. That was the longest stretch of consecutive days that US Equity was number one, and the second longest strength was the one that lasted from August 15th, 2016, until March 12th, 2020. That run lasted for 1,305 days with a return of 21.68% for the S&P 500.

The returns above are not inclusive of transaction costs. Investors cannot invest directly in an index or a model portfolio. Indexes and models have no fees. Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss. The relative strength strategy is not a guarantee.

As it stands now, it has been 50 days since US Equity moved back to number one in late August, and since that time US Equity has continued to gain new buy signals. On August 25th, US Equity had 229 buy signals when it moved back to number one, and today US Equity has 270 buy signals suggesting the asset class continues to gain strength. The bulk of those signals have come at the expense of Commodities, which has lost 22 signals since August 25th while all of the other asset classes have seen their tally signals count decline, as well. Only time will tell how long with reign at number one will last for US Equity, but historically it has been a generally positive sign for the market especially when that reign has been longer than about three months.

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The Dorsey Wright Sector Indexes are non-investable, equal weighted baskets of stocks including the largest and most liquid names from within each sector. The indexes are rebalanced daily and do not include the reinvestment of dividends. Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss.

Unless otherwise stated, the performance information included in this article does not include dividends or all potential transaction costs. Investors cannot invest directly in an index. Indexes have no fees. Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss.

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Dorsey Wright’s relative strength strategy is not a guarantee. There may be times when all assets are unfavorable and depreciate in value. Relative Strength is a measure of price momentum based on historical price activity. Relative Strength is not predictive and there is no assurance that forecasts based on relative strength can be relied upon to be successful or outperform any index, asset, or strategy.

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© Nasdaq Dorsey Wright

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