The Alpha Capture ETF Model Portfolio increased by 2.97% in January, outperforming its global 60/40 equity/bond benchmark by 98 basis points (bps). The portfolio’s overweight allocation to equities and positive selection effects, particularly in gold, boosted performance in January. The portfolio’s recent position in the SPDR Gold MiniShares ETF (GLDM) delivered a 6.71% gain, which outperformed other holdings and exceeded the entire benchmark’s return in January. Momentum signals remain positive for GLDM, especially relative to international equities and bonds. Moreover, the rolling correlation between gold and US equities has weakened over the past few months, while the stock/bond correlation increased, underscoring gold’s diversification benefits amid market uncertainty.
The gold selection was funded by a reduction to international equities, which reinforced the portfolio’s defensive hedge relative to its benchmark while capitalizing on strengthening trends in commodities.
In January, the Fairlead Tactical Sector ETF (TACK), an equal-weighted US sector ETF, increased by 3.14%, primarily driven by gains in the financial sector. TACK’s recent rebalance also included a mix of gold alongside equal allocations to short-term and long-term Treasuries. TACK’s rebalance provides a small exposure to Treasuries within the Alpha Capture portfolio, although we remain substantially underweight this segment relative to the benchmark. Over time, the portfolio can tilt toward fixed income if relative strength signals improve, especially given extreme oversold conditions in Treasuries.
The Horizon Kinetics Inflation Beneficiaries ETF (INFL) also aided in the portfolio’s outperformance. INFL benefitted from its exposure to financials and materials, which are inflation-sensitive sectors. In January, European equities outperformed US equities. The outperformance provided positive relative strength signals for European stocks on an absolute basis and relative to global bonds. However, the portfolio’s broad exposure to international equities, albeit dialed back to accommodate gold, is sufficient.
The start of 2025 will likely be a challenging environment for equities, but a more favorable environment for active management. We remain disciplined, relying on long-term shifts in relative strength and momentum to justify timely positioning.
No additional portfolio changes were made after the January 6 rebalance.