While all of that activity was volatile and dramatic, we did not see much change in underlying market trends, which can be best described as an ugly grind higher.

Trends were generally positive and stronger for U.S. markets than for International markets. The S&P 500 (through mid-day on June 30th) was up 1.1%, while the Russell 2000 was up over 2.0%. Emerging Markets and the MSCI EAFE Index declined between 0.8% and 2.2% respectively. U.S. sector performers included Gold Miners (up 36.0%) and Oil & Gas Exploration (up 16.0%). Lagging sectors included Retailing (down 9.6%) and Technology (down 3.1%).

It appears that the energy sector did make an important bottom on February 11th, and since then it has been a market leader. Meanwhile, the retailing sector, long one of the beneficiaries of quantitative easing, was harmed by lower margins due largely to wage pressures.

Despite the broad-based lack of confidence that we see from the public regarding the economy, the fact is that unemployment is very low, and wages have finally begun to increase at a slow but noticeable rate. Sectors that are sensitive to inflation, such as materials, had momentum at their back. However, in our strange world of quantitative easing, so did bond proxy-like equities such as utilities, consumer staples, and telecommunications.

While the U.S. economy is at least seeing a very modest upward pressure on wages, there is no doubt in our opinion that globally, forces are deflationary. Internationally, we saw strong performances by commodity-producing nations such as Brazil (up 13.7%), Argentina (up 14.2%), and Russia (up 6.6%). Europe struggled as Brexit vote concerns, weak economic growth, and negative interest rates haunted European financials, in particular. The broad Eurozone (down 5.7%), Spain (down 8.1%), and Italy (down 10.9%) were big laggards. After the results of the Brexit vote, the declines were dramatic and represented pure panic. The S&P 500 declined by 5.7% within two trading days, and the MSCI EAFE Index declined by a dramatic 10.9%.

Our view coming into the Brexit vote was that any decline would be a buying opportunity, and we did put some cash to work in our Alternative and U.S. Style portfolios, along with selling some Gold and Treasuries, which spiked higher upon the Brexit news. While markets spiked lower on the Brexit news, as of June 30th they had regained much of their losses.

U.S. Sector Opportunity Portfolio

SECURITY TICKER WEIGHT
iShares US Medical Devices ETF IHI 14.00%
Vanguard Materials ETF VAW 10.00%
PowerShares S&P Small Cap Technology ETF PSCT 10.00%
PowerShares S&P Small Cap Consumer Staples ETF PSCC 8.00%
Industrials Select Sector SPDR XLI 7.00%
S&P Metals & Mining SPDR XME 7.00%
iShares Mortgage Real Estate Capped ETF REM 5.00%
Dow Jones Wilshire REIT SPDR RWR 5.00%
Utilities Select Sector SPDR XLU 5.00%
iShares Semiconductor ETF SOXX 5.00%
iShares S&P North American Technology – Software IGV 5.00%
JPMorgan Alerian MLP ETN AMJ 4.00%
iShares US Aerospace & Defense ETF ITA 4.00%
VanEck Vectors Gold Miners ETF GDX 3.00%
VanEck Vectors Steel ETF SLX 3.00%
Cash 5.00%

The Sector Opportunity portfolio uses a relative strength methodology to rank the top-performing sectors over the intermediate term, and by owning these sectors going forward (and avoiding lower-ranked sectors) attempts to outperform the S&P 500. During the quarter, the portfolio maintained its recent emphasis on Materials, and given the solid market breadth, we have begun to allocate to small cap sector ETFs as well. With the exception of the trend towards Materials (and a developing trend toward Energy), we don’t see many major new relative strength trends. We consider the portfolio to be well diversified as we wait for more pronounced trends to develop.

  • The portfolio’s second quarter performance was, by our estimate, in line with the S&P 500 (gross of fees).
  • Materials-oriented sectors including gold and silver miners, broad materials, and metals and mining top our relative strength matrix. Due to domination of the ranks by just one sector, we have had to manage our materials-related position size, which is currently at 23%. While that is high, we have been unwilling to get more concentrated even though our rankings might recommend doing so.
  • The depth and persistence of the multi-year decline in energy meant our models needed to wait for a sustained uptrend in relative strength before energy could become a holding. Energy has been steadily rising after a strong second quarter, and a few ETFs have risen into the top half of our ranks. They are potential purchases if Energy can sustain its current trend.
  • While the Materials area tops our rankings, the weakest areas are Banking, Biotechnology, and Retailing. We are completely avoiding these market segments.
  • Metals & Mining (XME), Gold Miners (GDX), and Medical Devices (IHI) were the portfolio’s top contributors. Industrials (XLI), Small Cap Technology (PSCT), and Consumer Staples (XLP) were the top detractors.

The portfolio has become broad and quite diversified. Its current sector weightings are as follows: Materials 23.0%, Technology 20.0%, Health Care 14.0%, Industrials 11.0%, Financials 10.0%, Consumer Staples 8.0%, Utilities 5.0%, Energy 4.0%, and Cash 5.0%. The portfolio does not allocate towards the Consumer Discretionary or Telecommunications sectors at this time.

International Opportunity Portfolio

SECURITY TICKER WEIGHT
iShares Canada ETF EWC 15.00%
Market Vectors Russia ETF RSX 13.00%
iShares Russell MidCap ETF IWR 10.00%
iShares Thailand ETF THD 10.00%
iShares Australia ETF EWA 10.00%
iShares Brazil ETF EWZ 10.00%
iShares New Zealand ETF ENZL 7.00%
Global X MSCI Argentina ETF ARGT 6.00%
WisdomTree India Earnings ETF EPI 5.00%
iShares Philippines ETF EPHE 5.00%
Global X MSCI Norway ETF NORW 4.00%
Cash 5.00%

The International Opportunity portfolio’s stated mission is to allocate tactically between international country and region ETFs that are displaying significant relative strength (and to avoid those that do not), and in doing so, attempt to outperform the MSCI All Country World Ex-U.S. Index. International markets, particularly emerging markets, underwent a full-on bear market between late 2014 and early 2016. We now see that emerging markets, particularly commodity-producing markets, put in important lows during the first quarter. Since then they have been providing market leadership, while Europe’s economic struggles (signified by negative interest rates across the continent) means it has been pulling up the rear. Here are some other important developments in the portfolio during the quarter:

  • U.S. markets have outperformed global markets for a number of years now, and we foresee no slowing of that trend. As a result, we maintain a position in the U.S. via the Russell MidCap ETF (IWR).
  • Latin America and Emerging Asia have for the past number of months displayed the most relative strength momentum. As a result, we favor Argentina (ARGT), Brazil (EWZ), Russia (RSX), Thailand (THD), the Philippines (EPHE), and India (EPI) in the portfolio.
  • Europe remains a substantial underweight, and we only own one small position: Norway (NORW), a commodity and oil producer. European financials have been the weakest segment among international equities, and we are satisfied that our relative strength rankings have helped to avoid the area.
  • Japan was a substantial weight in the portfolio for much of 2015, but its relative strength collapsed in early 2016, and we completely exited Japan by the middle of the first quarter. Now that the yen has surged (despite negative interest rates in Japan), the Japan Hedged ETF (DXJ) ranks at the very bottom of our list.
  • Brazil (EWZ), Argentina (ARGT), and Thailand (THD) were the portfolio’s top contributors, while Turkey (TUR), Indonesia (IDX), and South Korea (EWY) were the top detractors.

The portfolio’s regional allocations are as follows: 20.0% to Emerging Asia, 17.0% to Developed Asia, 16% to Latin America, 15% to Canada, 13% to Emerging Europe, 10% to the U.S., 4% to Europe, 5.0% to cash.

Style Opportunity Portfolio

SECURITY TICKER WEIGHT
iShares Russell MidCap Value ETF IWS 42.00%
iShares High Dividend Equity ETF HDV 30.00%
iShares USA Minimum Volatility USMV 15.00%
iShares S&P 500 Value ETF IVE 10.00%
Cash 3.00%

The Style Opportunity portfolio ranks a number of U.S. equity styles and factors using CCMG’s relative strength-based ranking methodology and then assembles them into a broad-based portfolio that attempts to outperform the S&P 500. During the first quarter, we saw that the long-standing trend favoring growth over value had indeed reversed, and by early in the second quarter the portfolio sold all its growth stocks and began to invest in value, particularly Mid Cap Value (IWS). Value-oriented sectors such as Utilities and Energy have since been market leaders. Financials, the largest component in value indexes, have been mixed as banks have struggled. But interest-rate sensitive REITS and Insurance have performed well. Along with a solid position in value, our relative strength rankings in particular favor large-cap stocks that pay dividends and/or have high-quality balance sheets. Here are some additional key developments in the portfolio during the quarter:

  • Among the major Morningstar Style Boxes, Mid Cap Value (IWS) topped our ranks for most of the quarter, and it has now become our largest position. The strong performance of REITs, Utilities, Energy, and Materials have driven its relative strength.
  • High dividend paying stocks (HDV) and Low Volatility (USMV) currently top our Style ETF rankings. This should not be surprising, as the S&P 500 has been flat on a price basis for 18 months now. With stocks offering no price appreciation, dividends have become a prime source of returns for investors.
  • Corporate buybacks are considered to have been a key driver of the secular bull market since 2009. However, the buyback ETF in our universe, PowerShares Buyback Achievers (PKW), has fared poorly and has ranked at the bottom of our relative strength matrix along with Small Cap Growth (IWO).
  • The top contributors during the fourth quarter were the iShares Core High Dividend Equity (HDV) and the iShares Russell Midcap Value (IWS). The top detractors were the Guggenheim S&P 500 Equal Weight (RSP) and the iShares S&P 500 Value ETF (IVE).

Global Tactical Portfolio

SECURITY TICKER WEIGHT
iShares Australia ETF EWA 12.00%
iShares Russell MidCap Value ETF IWS 12.00%
Vanguard Materials ETF VAW 12.00%
Vanguard Telecommunications ETF VOX 12.00%
Industrials Select Sector SPDR XLI 12.00%
Consumer Staples Select Sector SPDR XLP 12.00%
Utilities Select Sector SPDR XLU 12.00%
S&P Metals & Mining SPDR XME 12.00%
Cash 4.00%

The philosophy of the Global Tactical portfolio underwent a significant change during the quarter, as we began using the Fixed Income Total Return model to manage risk in the portfolio. When the Fixed Income Total Return model is positive on High Yield Bonds (and thus on credit risk and market risk in general), the portfolio will select ETFs that are part of a narrowed-down universe of 32 U.S. equity styles, broad U.S. sectors, international country/regions, Gold, and a broad commodity ETN. However, when the Fixed Income Total Return model indicates caution, the portfolio will add U.S. Treasuries or cash in line with the model’s indications. As markets underwent a dramatic (but very brief) crash after the Brexit vote results, the Fixed Income Total Return model nearly signaled caution and de-risking. We were pleased that it did not, as we view the Brexit vote as a sentiment-related and not economic-related event. Markets rallied after the brief two-day Brexit-driven decline, and while our model has improved and still favors risk-on, the dramatic strength of U.S. Treasuries means we remain closer than we had been to de-risking the portfolio. After the end-of-quarter rally, we hope that if we do need to take a cautious stance, our exit point to do so will be improved. The following were other key portfolio developments during the quarter:

  • The portfolio now allocates entirely to U.S. equities, with Materials, Metals & Mining, value stocks, and quality, defensive equities such as Utilities and Telecommunications featured prominently. Cash is at 4%.
  • Under the portfolio’s new methodology, normally you will see the portfolio allocate to the top eight ranked ETFs in our universe of 32 available ETFs, weighting each position equally at 12%.
  • Metals & Mining (XME), Gold Miners (GDX), and Gold (GLD) were the portfolio’s top contributors, while Turkey (TUR), Brazil (EWZ), and Indonesia (IDX) were the top detractors.
  • China (GXC), Japan (EWJ), the U.K. (EWU), and the Eurozone (EZU) are the bottom of our 32 ETF available investment universe for the Global Tactical portfolio.

Alternative Opportunity

SECURITY TICKER WEIGHT
iShares Core S&P Mid Cap ETF IJH 9.00%
Neuberger Berman Multi-Manager ­Absolute Return NABIX 8.00%
Neuberger Berman Long / Short Inst'l NLSIX 8.00%
Blackrock Global Credit Long – Short Instl BGCIX 8.00%
TFS Market Neutral Fund TFSMX 8.00%
AQR Managed Futures High Volatility I QMHIX 8.00%
361 Managed Futures Fund I AMFZX 8.00%
iShares Russell 2000 IWM 7.00%
VelocityShares Inverse VIX Short-Term XIV 6.00%
Barclays High Yield Bond SPDR JNK 4.00%
iShares iBoxx High Yield Corporate Bond ETF HYG 4.00%
PowerShares QQQ QQQ 3.00%
iShares Core Emerging Markets ETF IEMG 3.00%
Barclays Convertible Bond SPDR CWB 2.00%
ETFS Physical Platinum Shares PPLT 2.00%
iPath Bloomberg Coffee ETN JO 2.00%
iPath Bloomberg Grains ETF JJG 2.00%
Cash 8.00%

The Alternative Opportunity portfolio contains what we believe to be a diversified mix of themes which breaks down as follows: Alternative-Oriented Mutual Funds 48.0%, Tactical Global Equity 28.0%, Fixed Income 10.0%, Commodities 6.0%, and Cash 8.0%.The following are some important events and themes that occurred in the portfolio during the quarter:

  • Managing equity risk, and managing our positions in volatility in particular, we credit as having been key contributors to the returns of the Alternative Opportunity sleeve. Prior to the Brexit vote, we reduced our position in inverse volatility (XIV). After markets began a dramatic (but very brief) crash, we added back to our positions in volatility and also added to Mid Caps (IJH). We also sold Gold (IAU) and long-term Treasuries (TLT) after they spiked in the aftermath of the vote.
  • The top contributors to return for the quarter were Inverse Volatility (XIV), High Yield Bonds (JNK), and AQR Managed Futures High Volatility (QMHIX), while the top detractors were TFS Market Neutral (TFSMX), Copper (JJC), and Grains (JJG).
  • The portfolio could well add commodity ETFs and ETNs more into the portfolio’s mix, as commodities appear to have recovered from the worst of their rout — a major bottom appears to have been made in February. During the second quarter, the portfolio took positions in Platinum (PPLT) and Gold (IAU) as well as Grains (JJG) and Coffee (JO).
  • The core alternative-oriented mutual funds in the portfolio are chosen not only for their managers’ strong records and deep research teams, but for their comparative lack of correlation to equity markets. Because the Alternative portfolio’s core mission is to provide genuine diversification for investors, we continue to emphasize lack of correlation in the portfolio. We expect to make some changes to our mix of mutual funds in the portfolio, as some funds have fallen in peer group rankings.

Fixed Income Total Return

SECURITY TICKER WEIGHT
iShares iBoxx $ High Yield Corporate Bond ETF HYG 24.00%
Barclays High Yield Bond SPDR JNK 19.00%
Blackrock High Yield Bond BRHYX 12.00%
JPMorgan High Yield Bond Select OHYFX 9.00%
Lord Abbett High Yield LAHYX 9.00%
PIMCO High Yield Bond Inst'l PHIYX 8.00%
AB High Income AGDYX 8.00%
Barclays Short-Term High Yield Bond SPDR SJNK 5.00%
PIMCO High Yield Spectrum Inst'l PHSIX 4.00%
Cash 2.00%

The Fixed Income Total Return (FITR) portfolio entered 2016 in a defensive position, owning 100% U.S. Treasuries. The defensive bias was beneficial, as fear took over and credit markets underwent a dramatic decline into mid-February and High Yield bonds yielded the most since 2009. When the trend becam e extreme and began to reverse, it took less than three weeks for the FITR model to become aggressive and buy back into High Yield at the end of February. Since February, credit markets have been strong, led by a dramatic decrease in High Yield bond yields, as sentiment improved with regard to the energy and materials sectors in particular. Our model favored High Yield and was at an all-time high coming into the Brexit vote. In just two days, the combined strength in Treasuries and weakness in High Yield nearly forced us to sell and become defensive — but only nearly. The quick, dramatic rally after the two-day decline in the aftermath of the vote affirmed our view that the Brexit vote was a sentiment-related and not economy-related event. We were relieved when the FITR model weakened, but didn’t weaken enough to prompt what we viewed as a potentially untimely sale of High Yield. From where we sit, we see that so far this year the FITR portfolio has achieved its primary goals of preserving capital and being tactically opportunistic within the High Yield bond sphere. Here are some additional developments from the portfolio during the quarter:

  • The Barclay US High Yield Corporate Bond Index was up 5.2% on the quarter, and the Energy and Materials sectors accounted for over half of that return, 3.2%, despite their weight being only 20% in the High Yield Index. Technology and Utilities were the weakest High Yield bond sectors.
  • As of June 30th, the resulting duration of the FITR portfolio is 4.01, with a Yield to Maturity of 7.07%. The average maturity is 6.77 years, and average credit quality is B+.
  • On the quarter, the portfolio’s top contributors were High Yield Bond ETFs (JNK and HYG), and Lord Abbett High Yield (LAHYX). The portfolio’s top detractors were the Barclays Short-Term High Yield Bond SPDR (SJNK), PIMCO High Yield (PHIYX), and PIMCO High Yield Spectrum (PHSIX), all of which are on the more conservative side of the spectrum within High Yield.

Sentry Managed Volatility Portfolio

SECURITY TICKER WEIGHT
Navigator Sentry Managed Volatility Fund NVXIX 95.00%
Cash 5.00%

Latest Update: July 1st, 2016

Hedging one’s equity exposure during a strong market for equities — or even during just a flat market for equities — is an exercise in patience and in understanding the proper role of a hedge in a broader portfolio. When our assessment of the markets is broadly bullish – as it is for 2016 – the Navigator Sentry Managed Volatility Fund attempts to manage the cost of hedging while maintaining a minimal hedge required to safeguard client assets. Under these circumstances, the Navigator Sentry Managed Volatility fund is a net loser in client portfolios, waiting for its day when protection will shine.

For most of the quarter, the S&P 500 was slowly grinding higher, and the Managed Volatility Fund (NVXIX) maintained its strategy of always owning protection for the portfolio. Over the quarter, we used methods to short volatility in order to partially offset the cost of the hedge. In doing so, we remained focused on managing our downside exposure without taking on undue risk. Coming into the Brexit, we viewed the market uncertainty as a unique risk and for the very short-term changed our views to cautious. Thus, we took off our shorts of volatility and increased the magnitude of the hedge. When markets cracked after the surprising vote result, the Fund was up 17% during the decline of the next few days. Soon after the Brexit-based decline, we re-established our longer-term strategy of shorting volatility to once again reduce the cost of the hedge. For the quarter, the Sentry fund gained 2.07% despite the fact that the fund was constantly hedging the S&P 500, which gained 2.46%. We were pleased to be able to provide what our experience tells us is a cost-effective hedge for clients during the quarter.

This material is not financial advice or an offer to sell any product. Not every client’s account will have these exact characteristics. The actual characteristics with respect to any particular client account will vary based on a number of factors including but not limited to: (i) the size of the account; (ii) investment restrictions applicable to the account, if any; and (iii) market exigencies at the time of investment.

Clark Capital Management Group, Inc. reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The information provided in this report should not be considered a recommendation to purchase or sell any particular security, sector or industry. There is no assurance that any securities, sectors or industries discussed herein will be included in an account’s portfolio. Asset allocation will vary and the samples shown may not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings. It should not be assumed that any of the securities transactions, holdings or sectors discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein. Clark Capital Management Group, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Clark Capital’s advisory services and fees can be found in its Form ADV Part 2A Appendix 1 Wrap Fee Brochure which is available upon request.

The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.

These portfolio holdings and weightings reflect portfolio models that may or may not have changes since publication. Actual client holdings and weightings may or may not differ. Performance since position initiated reflects the performance of security from the closing price of the day before the initial purchase date. This performance does not reflect actual performance of any actual client position or account. In addition, performance does not reflect total performance of a specific position as allocations are often reduced or increased. This performance does not reflect the deductions of any fees. For information on fees see the Form ADV Part 2A Appendix 1 Wrap Fee Brochure for Unified Solutions. This research has not been reviewed by FINRA. The S&P 500 Index is an unmanaged market capitalization weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance. It represents approximately 75% of the U.S. equities market. Index returns do not reflect fee deductions. Benchmark index performance provided by Bloomberg and includes dividends. It is not possible to make an investment directly in any index.

Non-Reliance and Risk Disclosure: This material has been prepared by Clark Capital Management Group. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on this material. It is for the general information of our clients. It does not constitute a recommendation or take into account the particular investment objectives, financial conditions, or needs of individual clients. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. All indices are unmanaged and cannot be invested into directly. The volatility (beta) of a client’s portfolio may be greater or less than its respective benchmark. It is not possible to invest in these indices. High Yield Fixed Income are lower-rated securities, have credit risk, and are especially price sensitive when interest rates rise. Components with international securities may be more susceptible to political, economic, and financial events, or natural disasters than U.S. securities. In the Alternative investments, Real Estate has risks associated with direct ownership; valuations of real estate may be affected by economic or financial conditions or catastrophic events resulting from forces of nature or terrorist acts. Currencies have risk related to political, economic, or financial events, or natural disasters; a country’s debt level and trade deficits; government intervention in the currency market; and currency exchange rates. Energy investments have risk from volatility of global prices, regulation by governments and contractual price fixing, asset class risk, and currency risk. Commodities are affected by global supply and demand; domestic and foreign interest rates; political, economic, financial events, or natural disasters; regulatory and exchange position limits; and concentration within a commodity. Absolute investment strategies may deviate substantially from overall market returns; foreign securities, particularly those of emerging markets, are susceptible to political, economic, and financial events, or natural disasters; the use of derivatives may have a large impact on the segment as may use of investments involving leverage. Global Infrastructure investments include investment in companies that principally engage in management, ownership, and operation of infrastructure and utility assets. Global infrastructure investing includes security, political, and geographical risks, among others. Commodity investments are vehicles used by investors to gain exposure to commodities and commodity futures. There are a number of ways investors can gain exposure to commodities. Transactions in commodities carry a high degree of risk, and a substantial potential for loss. Emerging Markets are typically countries in the process of industrialization, with lower gross domestic product (GDP) per capita than more developed countries. International investments involve special risks such as fluctuations in currency, foreign taxation, economic and political risks, and differences in accounting and financial standards. Emerging market investments are more risky than developed market investments. Returns and principal invested in stocks are not guaranteed. Small stocks are more volatile than large stocks and are subject to significant price fluctuations, business risks, and are thinly traded.

Special Risk Disclosure related to U.S. Registered Exchange-Traded Funds (“ETFs”) and Exchange-Traded Notes (“ETNs”): To the extent this communication contains information pertaining to U.S. registered ETFs or ETNs, consider the investment objectives, risks, and charges and expenses of the ETFs and ETNs carefully before investing. Each ETF and ETN has filed a registration statement (including a prospectus) with the SEC which contains this and other information about the ETF or ETN as applicable. Before you invest in an ETF or ETN, you should obtain and read carefully the prospectus in the registration statement and other documents the issuer has filed with the SEC for more complete information about the product. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, you may obtain a copy of the prospectus for each of the ETFs and ETNs mentioned in these materials by contacting the ETF sponsoring company. ETFs are redeemable only in Creation Unit size aggregations and may not be individually redeemed; are redeemable only though Authorized Participants; and are redeemable on an “in-kind” basis. The public trading price of a redeemable lot of the ETFs may be different from its net asset value. These ETFs can trade at a discount or premium to the net asset value. There is always a fundamental risk of declining stock prices, which can cause losses to your investment. Most leveraged and inverse ETFs “reset” daily, meaning that they are designed to achieve their stated objectives on a daily basis. Due to the effect of compounding, their performance over longer periods of time can differ significantly from the performance (or inverse of the performance) of their underlying index or benchmark during the same period of time and as such are not meant to be held for the long term. This effect can be magnified in volatile markets. Prior to entering into a transaction in leveraged or inverse ETFs, you should be aware of the general risks associated with such transactions. You should not enter into leveraged or inverse ETFs transactions unless you understand the nature and extent of your risk exposure. You should also be satisfied that the leveraged or inverse ETFs transaction is appropriate for you in light of your circumstances and financial condition.

The relative strength measure is based on historical information and should not be considered a guaranteed prediction of market activity. It is one of many indicators that may be used to analyze market data for investing purposes. The relative strength measure has certain limitations such as the caluclation results being impacted by an extreme change in a security price.

CCM-508

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