The third quarter of 2017 continued a slow grind higher for U.S. equity markets, while international markets continued to provide leadership and even better returns. Within fixed income, credit continues to outperform duration and, while interest rates dipped lower in early September, by the end of the month they had returned to the range they have seen for most of 2017. Emerging markets led the way on the quarter with a 7.6% gain, while the NASDAQ gained 5.8% and the S&P 500 4.5%. The spike downward and then the reversal in interest rates that we saw in early September could well be a shift in market leadership, as since then beneficiaries of risk-on and rising interest rates have soared. The bottom in rates coincided with three headline-making events: the final end to chances for a repeal of Obamacare, the heights of tensions with North Korea, and the renewed focus on a potential Trump tax reform plan. Of the three, we believe that the potential for tax reform had the strongest bullish effect, particularly for U.S. small caps. The winners since early September have included banks and Financials, small caps, and Energy. The S&P Goldman Sachs Commodity Index gained 7.2% on the quarter, as oil was particularly strong. Still, it took until early September for Energy stocks to take off and benefit from oil’s rise.

The bears waiting for the downside have had the markets tell them: resistance is futile. Many investors have been anticipating and fearing a sizeable correction this year and, if you positioned yourself defensively in anticipation of a waterfall decline, you have taken on pain. The S&P 500 is up 14.2% year to date through September 30th, with the NASDAQ up 20.7%, and emerging markets up 23.5%. Despite the many headlines about potential rising interest rates, a credit bubble in China, lofty stock market valuations, and North Korean bombast, the real risk markets have presented in 2017 is the risk of not participating in the upside. Volatility and an authentic downside have been fleeting to nonexistent. The last 5% correction in the S&P 500 occurred in November 2016, and a 3% correction occurred only once in March. As always, the media monitors Federal Reserve activity closely and doubtless this has an effect on investors. In this regard, the market has been surprisingly resilient. Another interest rate hike in December is largely priced into expectations. The Fed announced in September that it will now finally begin to reduce the size of its balance sheet, though only by a small amount. Even the suggestion of a reduction has stoked fears and a “taper tantrum” in the past, but now that balance sheet reduction is a reality, there has been no adverse reaction. While it has been nearly a year)since a 5% retracement and valuations indicate that a correction is overdue and possible at any time, economic indicators are absolutely solid, and international economies are now virtually all growing. We’d particularly like to note that Europe has finally joined the party. So, while we are well aware of the risk that a correction could come, we need to see much more evidence of cracks in the foundation before taking action to play defense and preserve the gains that 2016 and 2017 have provided.

U.S. Sector Opportunity Portfolio

SECURITY TICKER WEIGHT
Vanguard Information Technology ETF VGT 15.00%
iShares Exponential Technologies ETF XT 14.00%
Vanguard Health Care ETF VHT 12.00%
iShares NASDAQ Biotechnology ETF IBB 10.00%
VanEck Vectors Steel ETF SLX 10.00%
iShares PHLXSemiconductor ETF SOXX 8.00%
iShares DJ U.S. Aerospace & Defense ETF ITA 7.00%
iShares DJU.S. Home Construction ETF ITB 5.00%
VanEck Vectors Gold Miners ETF GDX 4.00%
S&P Biotech SPDR XBI 4.00%
Guggenheim Solar ETF TAN 3.00%
Global X Lithium & Battery Tech ETF LIT 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. Market leadership and the Sector Opportunity portfolio maintain a risk-on bias, and that is best reflected by where we are not invested and have not been invested for much of 2017 – in the defensive-oriented Consumer Staples, Telecommunications, and Utilities sectors. Technology has been a market leader throughout 2017, and the portfolio continues to allocate a large, 37% position to the sector, nearly twice its weight in the S&P 500. As the quarter progressed, we allocated towards Health Care, particularly biotechnology, and also Materials, including lithium, steel, and solar energy. Financials, particularly insurance and broker dealers, were liquidated. Technology’s relative performance stalled in the second half of September, and while the sector still ranks high, it can be said to have stalled as of the month’s end. However, we have seen the sector rebound time and again after a rough four to six week period, so while we might be reducing the sector in the coming weeks, we will give it the benefit of the doubt in the long run. Here are some further developments in the portfolio during the quarter:

  • During the quarter, we purchased Lithium & Battery Technology (LIT), which experienced strong gains in early September after China revealed intentions to move towards selling only electric cars within a few decades. We reduced but did not sell all of our position after the rally. Insurance (KIE) was caught on the wrong side of the news, as our position in the sector was harmed by the recent hurricanes. We eventually liquidated the position.
  • Lithium (LIT), Biotechnology (IBB and XBI), and Semiconductors (SOXX) top our relative strength rankings as of the end of the quarter. Exponential Technologies (XT), which includes “industries of the future” such as 3D printing, bioinformatics, nanotechnology, environmental systems, and five other fields, has been persistently strong, and we like its diversified and unique portfolio exposures.
  • Regional Banks (KRE), Oil & Gas Equipment (IEZ), and Small Cap Energy (PSCE) are the fastest rising ETFs within our ranks. Consumer Staples (XLP), Telecommunications (VOX), and Energy MLPs (AMJ) currently rank near the bottom.
  • Lithium & Battery Technology (LIT), Information Technology (VGT), and Aerospace & Defense (ITA) were the portfolio’s top contributors. Insurance (KIE), Broker Dealers (IAI), and Gold Miners (GDX) were the top detractors.

The portfolio’s current sector weightings are as follows: Technology 37.0%, Health Care 26.0%, Materials 20.0%, Industrials 7.0%, Consumer Discretionary 5.0%, and Cash 5.0%. The portfolio is not allocated towards the Financials, Consumer Staples, Telecommunications, Utilities or Energy sectors.

International Opportunity Portfolio

SECURITY TICKER WEIGHT
S&P China SPDR GXC 25.00%
iShares Italy ETF EWI 10.00%
iShares Brazil ETF EWZ 10.00%
iShares Poland ETF EPOL 10.00%
VanEck Vectors Russia ETF RSX 6.00%
iShares Austria ETF EWO 5.00%
iShares Chile Capped ETF ECH 5.00%
Deutsche X-Trackers CSI300 China A-Shares ETF ASHR 5.00%
Global X MSCI Norway ETF NORW 5.00%
iShares Netherlands ETF EWN 5.00%
iShares France ETF EWQ 5.00%
VanEck Vectors Brazil Small Cap ETF BRF 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 avoiding those that do not) and, in doing so, to attempt to outperform the MSCI All Country World ex USA Index. International markets continued to lead global markets higher, and the participation has been broad and wide. Developed markets, as represented by the MSCI EAFE, gained 5.4%. Europe on its own, however, gained 7.9%, and emerging markets gained 8.1%. One factor driving the international markets has been the dollar. It is down 9.1% on the year, even after rallying nicely in September. The euro along with currencies of emerging markets countries such as Brazil, Poland, and even Russia, have been ascendant. Conventional wisdom regarding U.S. markets is that we are in the very late innings of an economic expansion. However, the European and emerging market economies are at a much earlier stage in the cycle. We believe that the potential for future gains is higher among international equities compared to U.S. issues. That assertion is backed up by the fact that our International Opportunity portfolio, despite being in higher risk markets such as Brazil, China, Poland, and Russia, has a forward P/E of 13.6, which is below the World ex USA Index at 14.3 and considerably below the S&P 500 at 17.8. Here are some other developments during the quarter:

  • In contrast to our U.S. equity portfolio, the International Opportunity portfolio is in aggregate overwe ight the Energy sector, and it also overweights Utilities and Financials, all sectors that we do not favor in the U.S.
  • Despite a steady flow of reports raising concerns about a credit bubble in China, Chinese market performance has been stellar, and we allocate 30% of the portfolio to China currently. Given the size of China’s economy — the second largest in the world — we think such a large position is appropriate.
  • Among the country ETFs in our international equity matrix, part of our universe of portfolio candidates, China (GXC — up 14.8%), Poland (EPOL — up 9.2%), and Italy (EWI — up 8.4%) were the top performers on the quarter. European Financials (EUFN — down 1.02%), Taiwan (EWT — down 0.75%), and Sweden (EWD — down 0.26%) were the worst performers. Although we owned EUFN and EWI for a time, they were not the top detractors in the portfolio. From these numbers, you can see that there was not much downside to be had with the universe.
  • During the quarter, major purchases included Brazil (EWZ), Brazil Small Cap (BRF), and Norway (RSX); both countries are energy producing nations. India (EPI) and Taiwan (EWT) were our largest positions sold. It is not surprising that Indian markets have begun to struggle, because India is one of the world’s largest energy importers, and its performance is often comparably worse when oil is on the rise.
  • China (GXC, Poland (EPOL), and Italy (EWI) were top contributors within the portfolio, while India (EPI), Chile (ECH), and European financials (EUFN) were the top detractors.

The portfolio’s regional allocations are as follows: 30.0% to Europe, 30.0% to emerging Asia, 19% to Latin America, 16.0% to emerging Europe, and 5.0% to cash.

Style Opportunity Portfolio

SECURITY TICKER WEIGHT
iShares S&P 500 Growth ETF IVW 30.00%
iShares Edge MSCI USA Momentum Factor ETF MTUM 30.00%
SPDR S&P 500 ETF SPY 20.00%
iShares MSCI USA Quality Factor ETF QUAL 15.00%
Cash 5.00%

The Style Opportunity portfolio ranks a number of U.S. equity styles and factors using Clark Capital’s relative strength-based ranking methodology, and then purchases those ETFs with higher rankings (and avoids those with lower rankings), assembling them into a broad-based portfolio that attempts to outperform the S&P 500. The portfolio maintained its stance towards the longer-term trend favoring growth throughout the third quarter. Large cap growth and momentum dominate the portfolio’s holdings, and there is no doubt that the solid performance among Technology stocks (up 8.3% — the best performing sector in the S&P 500) is the primary driver of this allocation, along with a lesser contribution from Health Care, where biotechnology stocks in particular led markets. Technology’s outperformance over a one- and three-year period has been quite dramatic, and we are watching to see if this trend is poised to reverse. Within our style and factor rankings, we are seeing some slippage among large cap growth stocks, whose relative strength, while not weakening, has flattened. Rising in the ranks are higher volatility stocks, including small cap and high beta. They are potential future additions if current trends hold. The following were further developments in the portfolio during the quarter:

  • The portfolio added the iShares MSCI USA Quality Factor ETF (QUAL) during the quarter, and exited positions in Mid Cap Growth (IWP), and Minimum Volatility (USMV). The changes and portfolio turnover were relatively modest.
  • Of the candidates for the portfolio in our universe, momentum (MTUM) gained 7.9% and the S&P 500 Growth (IVW) gained 5.2%; both were leading performers in our style box and factor matrix during the quarter. Mid Cap Value (IVOV) and Minimum Volatility (USMV) were up 2.8% and 3.3% respectively and were the weakest ETFs in our matrix.
  • In aggregate, the Style Opportunity portfolio is overweight Technology and Consumer Discretionary, traditional growth sectors, and underweight Energy and Consumer Staples. The portfolio has lagged a bit since Energy and Financials, the dominant value-oriented sectors, took off in early September. A major plus has been that Momentum Factor ETF (MTUM) has maintained its sound performance despite the dramatic sector rotation.
  • The top contributors to the portfolio during the quarter were the iShares Edge MSCI USA Momentum Factor ETF (MTUM) and the iShares S&P 500 Growth ETF (IVW). The top detractors were the iShares Edge MSCI USA Minimum Volatility (USMV) and the iShares Russell MidCap Growth ETF (IWP).

Global Tactical Portfolio

SECURITY TICKER WEIGHT
iShares All Country Asia ex Japan ETF AAXJ 12.00%
iShares MSCI Eurozone ETF EZU 12.00%
iShares S&P 500 Growth ETF IVW 12.00%
PowerShares QQQ QQQ 12.00%
Vanguard Information Technology ETF VGT 12.00%
Vanguard Health Care ETF VHT 12.00%
Vanguard FTSE Emerging Markets ETF VWO 12.00%
Vanguard Total International Stock ETF VXUS 12.00%
Cash 4.00%

The methodology of the Global Tactical portfolio is to select ETFs that are part of a narrowed-down universe of 32 U.S. equity styles, sectors, country/regions, and commodities. The portfolio uses the Navigator Fixed Income Total Return (FITR) credit-market model as an overlay to manage risk. When the credit-market model is positive towards high yield bonds (and thus on credit risk and market risk in general), the portfolio will select from its 32 ETF universe made up primarily of equities. 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. With the FITR model making new highs constantly throughout the quarter, we maintained a strong position in equities in accordance with our relative strength rankings. We have not seen any weakness in credit markets so far in 2017, so we would expect to favor equities for the foreseeable future. Technology, large cap growth, Asian equities, and emerging markets were the portfolio’s primary area of focus during the quarter.

  • Technology (VGT) has been a core holding in the portfolio for a number of quarters, and it receives a double weight of sorts via the NASDAQ 100 ETF (QQQ). We continue to favor these ETFs, but they are slowly slipping in our rankings as their outperformance slows.
  • The U.S. dollar weakness that we have seen in 2017 has been a major factor in our large allocations to international equity. However, the dollar rallied in September, and some of the edge that international stocks had has been taken away.
  • Under the portfolio’s 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%. Half positions of 6% will be seen when our rankings and trends are less clear.
  • Europe (EZU) and Asia ex Japan (AAXJ) were the portfolio’s top contributors, while Australia (EWA) and Latin America (ILF) were the top detractors.

Alternative Opportunity

SECURITY TICKER WEIGHT
BlackRock Event Driven Equity BILPX 10.00%
Gold Shares SPDR GLD 8.00%
LoCorr Long/Short Commodities Strategy LCSIX 7.00%
Altegris Futures Evolution Strategy I EVOIX 6.00%
BlackRrock Global Long/ShortCredit Instl BGCIX 6.00%
Neuberger Berman Long Short Instl NLSIX 6.00%
Nuveen High Yield Muni Inst’l NHMRX 6.00%
Legg Mason BW Alternative Credit I LMANX 6.00%
FlexShares Morningstar Global Upstream Natural Resources ETF GUNR 5.00%
Bloomberg Barclays High Yield Bond SPDR JNK 4.00%
iShares iBoxx $ High Yield Corporate ETF HYG 4.00%
ProShares UltraShort 20+ Year Treasury TBT 3.00%
VanEck Vectors Gold Miners ETF GDX 3.00%
IndexIQ Merger Arbitrage ETF MNA 3.00%
First Trust North American Energy Infrastructure Fund EMLP 3.00%
iShares Frontier 100 ETF FM 3.00%
iShares All Country Asia ex Japan ETF AAXJ 3.00%
VelocityShares Inverse VIX Short-Term XIV 2.00%
Nuveen Muni High Income Opportunity NMZ 2.00%
PowerShares CEF Income Composite ETF PCEF 1.00%
Cash 9.00%

The Alternative Opportunity portfolio is a well diversified mix of themes which currently breaks down as follows: alternative-oriented mutual funds and ETFs 50.0%, tactical global equity 19.0%, fixed income 14.0%, commodities 8.0%, and cash 9.0%. The following are some important events that occurred in the portfolio during the quarter:

  • The portfolio made a number of changes to its core mutual fund positions, adding Legg Mason BW Alternative Credit (LMANX) and Altegris Futures Evolution Strategy (EVOIX), and selling out of AQR Managed Futures (AQMIX). The Legg Mason fund is a concentrated go-anywhere credit fund, with a substantial allocation to international fixed income, where we see more potential opportunity. The Altegris fund gives us access to two and not just one managed futures managers, and the cash used for collateral is actively managed by DoubleLine. We also added to BlackRock Event Driven Equity (BILPX), increasing our total allocation to merger arbitrage to 13%.
  • The portfolio added tactical equity plays in the Inverse VIX (XIV) and MLP (EMLP) areas during the quarter, along with going short the long-term Treasury (TBT) and adding a closed-end fixed income ETF (PCEF).
  • Global Natural Resources (GUNR) and Frontier Markets (FM) continue to be tactical equity positions. We have found that equity exposure rather than owning the commodities themselves can be an effective way to profit from a commodity bull market, due to commodities’ excessive holding costs; thus we view the Natural Resources position as more of a core investment. Frontier Markets was added due to the strong trend in international markets, along with the ETF’s low beta and lower correlation to broad equities.
  • The top contributors to return for the quarter were VelocityShares Inverse VIX ETN (XIV), LoCorr Commodity Long/Short (LCSIX), and Natural Resources (GUNR). The top detractors were Oil Equipment (OIH) and Managed Futures (EVOIX and AQMIX).
  • The primary purpose of the core liquid alternative portion of the portfolio is to provide non-correlated alternative exposure. It includes seven mutual funds (and one ETF) in the long/short credit, alternative credit, long/short equity, long/short commodity, managed futures, high yield muni bond, and merger arbitrage areas.

Fixed Income Total Return

SECURITY TICKER WEIGHT
iShares iBoxx $ High Yield Corporate Bond ETF HYG 24.00%
Bloomberg Barclays High Yield Bond SPDR JNK 19.00%
BlackRock High Yield Bond BRHYX 12.00%
JPMorgan High Yield Select OHYFX 10.50%
PIMCO High Yield Bond Inst’l PHIYX 8.00%
Lord Abbett High Yield LAHYX 6.50%
AB High Income AGDYX 5.50%
Bloomberg Barclays Short-Term High Yield Bond SPDR SJNK 5.00%
Neuberger Berman High Income Inst’l NHILX 2.50%
MainStay High Yield Corporate Bond I MHYIX 2.50%
PIMCO High Yield Spectrum Inst’l PHSIX 2.50%
Cash 2.00%

The Fixed Income Total Return (FITR) portfolio has owned high yield bonds since the end of February, 2016, a period of over 18 months. It has been a great run for the asset class, as the Bloomberg Barclays High Yield Corporate Index is up 26.7% between February 29th, 2016, and September 30th, 2017. High yield outperformed again in the third quarter, gaining 1.98%, while the Bloomberg Barclays Aggregate Bond Index gained 0.85% and the Bloomberg Barclays US Treasury Index gained 0.38%. Corporate earnings and balance sheets remain in good shape, as all high yield sectors produced gains. The market’s attention remained on the Fed, and for much of the quarter interest rates declined, particularly in early September, when the 10-year Treasury yield fell to 2.06% amid the North Korea showdown. However, that proved to be an intermediate-term bottom for Treasury yields, and rates rose sharply during the rest of September, ending the quarter at 2.33%, in the middle of their range for much of the year. The market’s estimate of the probability of a December rate hike has now increased to 70%. Nevertheless, the Fed’s statements have made abundantly clear that they will be very gradual in their tightening. Within the high yield space, spreads as indicated by the Bloomberg Barclays Corporate High Yield OAS (Option-Adjusted Spread) made new lows of 3.47% at the end of September, indicating strong confidence in the broad economy and corporate stability. Here are some additional developments during the quarter:

  • Within the high yield bond universe there has been a substantial decline in issuance. In April 2015, the BofA Merrill Lynch High Yield Index contained 2326 issues, but as of September 30th it only contained 1873 issues, a 19.5% decline. The falling supply has been a bullish factor for high yield, as the huge group of investors hungry for yield are pursuing a smaller and smaller pool of issues.
  • While high yield bond issuance has declined over the past few years, that does not mean that overall corporate leverage has not increased. Instead, the lending has been in the leveraged loan area, where 2017 has seen the highest leveraged loan issuance since 2011. In addition, many providers of leveraged loans (often large private equity firms) have been willing to provide covenant-lite or even covenant-free loans (thus the borrower can become even more leveraged without the lender’s permission). We view these developments as just another reminder of the importance of managing the risk of this asset class. When the next major earnings or economic downturn does come our way, the high yield and leveraged loan spaces will see substantial losses as they have in the past, and we will rely on our model to guide us regarding the bigger economically-based trends.
  • The popularity of leveraged loans is easy to understand. Borrowers pay 0.75% to 1.00% less in interest compared to a high yield bond issuance. Now with covenants becoming much lighter or non-existent (and thus less constraining for the borrower), leveraged loans have become a prime vehicle for financing. From our perspective on behalf of clients, these leveraged loans do not have great appeal as an investment. We receive a yield that is 15 to 20% lower. In addition, these loans are very, very illiquid. In a potential crisis, they are much harder to unload in larger amounts at a reasonable price.
  • As of September 30th, the resulting duration of the FITR portfolio is 4.03. Average maturity is 7.95 years, and average credit quality is B+.
    On the quarter, the portfolio’s top performing holdings were Lord Abbett High Yield (LAHYX), BlackRock High Yield (BRHYX), and JPMorgan High Yield (OHYFX). The portfolio’s worst performers were Neuberger Berman High Income (NHILX), Mainstay High Yield Corporate (MHYIX), and the Barclays Short-Term High Yield SPDR (SJNK).

Sentry Managed Volatility Portfolio

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

Hedging one’s equity exposure during a strong market for equities — or even just a flat market for equities — is an exercise in patience and understanding the proper role of a hedge in a broader portfolio. Our assessment of the markets was bullish for the first half of 2017, and we expected modestly more volatility in the second half of 2018. So far, markets have held firm and even made new highs. During such bullish market environments, the Navigator Sentry Managed Volatility fund is a net loser in client portfolios, fulfilling its role of reducing volatility and waiting for its day when protection will shine.

We expected that while the first half of 2017 would produce solid gains, the second half should produce more volatility and perhaps losses for stock markets. None of the volatility has materialized. The VIX Volatility Index continues to make new lows, indicating fear and optimism are near record levels. For the Sentry fund and the hedging portion of our portfolios, this has meant zero to few opportunities to sell volatility upon market corrections. There have been no 5% corrections this year, and even a 3% correction has been rare. As a result, we continue to roll our protections as we see an opportunity, and wait for a better opportunity to be more active. The first half of 2018 could present more volatility, if history is a guide. However, the global economy appears to be firing on all cylinders, with Europe now fully participating. The global economy may be finally moving upward, and it is doing so very slowly, and thus a sustained, even multi-year period of growth is possible. While we expect more volatility to come in 2018, until we see a more concerning economic backdrop our stance will remain bullish, and we will not increase the magnitude of the hedge. We continue to maintain our equity hedge at all times.

Past performance is not indicative of future results. This is not a recommendation to buy or sell a particular security. Please see attached disclosures.

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 at the time you receive this report or that securities sold have not been repurchased. 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. All recommendations for the last 12 months are 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.
The Bloomberg Barclays U.S. Corporate High-Yield Index covers the U.S. dollar-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below.
Bloomberg Barclays U.S. Aggregate Bond Index: The index is unmanaged and measures the performance of the investment grade, U.S. dollar denominated, fixed-rate taxable bond market, including Treasuries and government-related and corporate securities that have a remaining maturity of at least one year.
The S&P 500 measures the performance of the 500 leading companies in leading industries of the U.S. economy, capturing 75% of U.S. equities.
Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index representing approximately 8% of total market capitalization of the Russell 3000.
The Russell 3000 Index measures the performance of the 3000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. The S&P 500 measures the performance of the 500 leading companies in leading industries of the U.S. economy, capturing 75% of U.S. equities
The S&P MidCap 400 Index represents US mid-sized companies covering over 7% of the U.S. equity market.
The MSCI World ex US Index is a market capitalization-weighted index designed to measure equity performance in 22 global developed markets, excluding the United States. The MSCI World Ex US Net Index is generally representative of international equities. Index returns reflect the reinvestment of income and other earnings, are provided to represent the investment environment shown, and are not covered by the report of independent verifiers.
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 calculation results being impacted by an extreme change in a security price.

CCM-508

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