After a brief but stunning fourth quarter 2018 decline, markets staged a fierce comeback in the first quarter. It all started with Federal Reserve Chair Jay Powell’s signaling on January 4th that the Fed would be ending its quantitative tightening program. Both equity and credit markets surged, and the rally continued unabated for most of the quarter. Economic stimulus in China, along with optimism about a potential end to the trade war also contributed to the bullish sentiment. Not surprisingly, small cap and technology stocks, the worst performers in the fourth quarter, rebounded the most during the first quarter.

Despite the S&P 500’s rally during the past year, we do not believe that we are in a valuation bubble. The forward P/E ratio of the S&P 500 is at 16.7, versus a 36 year mean of 14.8 – in our view, that puts valuations at the higher end of their normal range. Technology was the strongest performing sector, while financials lagged. According to Ned Davis Research, the top factor that drove returns during the quarter was mean reversion. As a result, the losers in the December decline were winners in the first quarter, and trend following investment strategies were whipsawed.

However, as the quarter came to an end, a new and important warning signal flashed—an inverted yield curve. An inverted yield curve occurs when (as in the present case) the interest rate on the 3-month T-Bill exceeds the rate on the 10-year U.S. Treasury. According to Ned Davis Research, going back to 1966, every time the yield curve has inverted there has been an equity bear market within two years. However, it’s important to note that the markets often continue to rally after an inversion, and historically have peaked from eight to 21 months after an inversion first occurs. After the yield curve inverted in 2006, markets rallied another 29% before peaking in October 2007.

In addition, as the first few days on April and the second quarter develop, the inversion in the yield curve has reversed. If the inversion returns and sustains, we will view it as more of a concern. For more of our insights on the yield curve, you can read Chief Investment Officer Sean Clark’s latest Market Update here.

U.S. Sector Opportunity Portfolio

The Sector Opportunity portfolio uses a relative strength methodology to rank the top performing sectors over the intermediate-term, and attempts to outperform the S&P 500. The portfolio came into the year heavily invested in the market index, the S&P 500, and as the quarter developed, it has moved to favor more cyclical holdings, particularly in technology (VGT), home builders (XHB), and online retail (IBUY). Technology proved to be the market’s only major leadership, and the sector was up 19.4% on the quarter.

During the quarter, we added internet (FDN), software (IGV), semiconductors (SOXX), and broad technology (VGT) holdings to the portfolio. Real estate was another addition, as it has enjoyed steady relative strength for some time and has enjoyed a tailwind from falling interest rates.

Aerospace was a large position and relative leader, but the sector experienced unexpected pain when Boeing stock plummeted after two plane crashes. Mean reversion was the dominant factor driving markets, as four of the five top returning sectors from the first quarter were the worst performing sectors during the fourth quarter decline. The exception to that trend was real estate. Here are some further developments in the portfolio during the quarter:

  • As the quarter developed, relative strength trends have remained in technology, real Estate, and parts of the consumer discretionary sector (online retail and home builders). The broader consumer discretionary sector is now on the rise as well. We believe financials and energy are oversold but due for a bounce. However, their longer-term trends are far from reversing.
  • Health care was the weakest sector, which makes sense as it was the strongest sector in 2018, and we are in a mean-reverting environment. Among health care industries, only small-cap biotechnology shows up near the top half of our rankings.
  • Top 5 Contributors

    Holding Ticker Average Weight (%) Contribution to Return (%)
    iShares Core S&P 500 ETF IVV 24.93 4.86
    SPDR S&P Homebuilders ETF XHB 14.7 2.46
    iShares Expanded Tech-Software Sector ETF IGV 12.69 2.23
    First Trust Dow Jones Internet Index Fund FDN 9.1 1.14
    iShares PHLX Semiconductor ETF SOXX 5.17 0.46

    Top 5 Detractors

    Holding Ticker Average Weight (%) Contribution to Return (%)
    Vanguard Industrials ETF VIS 3.07 -0.3
    iShares U.S. Aerospace & Defense ETF ITA 4.64 -0.1
    SPDR S&P Health Care Equipment ETF XHE 4.22 -0.04
    Moneyfund CASH_ISO 1.81 0
    Utilities Select Sector SPDR Fund XLU 0.92 0.03
    Source: FactSet as of 3/31/19 Past performance does not guarantee future results. The holdings identified do not represent all of the securities purchased, sold or recommended for advisory clients. In the chart above, “weight” is the average percentage weight of the holding during the period, and “contribution” is the contribution to overall performance during the period. To obtain the calculation methodology and a list showing every holding’s contribution to the overall composite performance during the period, contact PortfolioAnalytics@ccmg.com.

International Opportunity Portfolio

The International Opportunity portfolio’s stated mission is to allocate tactically between international style, factor, and region ETFs that are displaying significant relative strength an attempt to outperform the MSCI All Country World Ex-U.S. Index. Early in the first quarter, the International Opportunity portfolio completed a change in its investment universe, moving away from country-specific ETFs and towards international style, factor, and region ETFs.

Potential investments now include: international value, growth, quality, small-cap, currency hedged, minimum volatility, buyback, and momentum ETFs, along with emerging markets, emerging markets small-cap, and emerging markets minimum volatility ETFs. Asia Ex-Japan, Eurozone, U.S. Equity, and real estate ETFs round out the potential choices. Given the new, smaller universe size that the portfolio follows, we expect that the portfolio will own between three to six ETFs, or up to about one-third of the universe featuring 18 different ETFs.

Coming into the quarter, the portfolio was defensively positioned and favored minimum volatility ETFs primarily. As the rally expanded, the focus shifted towards emerging markets, Asia Ex-Japan, and U.S. equity. Europe and developed markets remain weak, but the developed market quality factor ETF has stood out despite the headwinds.

In a tough economic environment for Europe, Japan, and developed markets, strong balance sheets and stable earnings were rewarded. Here are some further developments in the portfolio during the quarter:

  • The Vanguard Emerging Markets Stock Index (VWO) and iShares MSCI All Country Asia ex-Japan Index (AAXJ) were featured prominently in the portfolio. That is a result of China’s strong recent returns, along with an election-driven rally in Brazil. Brazil’s gains have moderated, but China has rallied strongly due to an increase in China A Shares in MSCI Indexes and optimism that the U.S.–China trade dispute will be resolved favorably.
  • Europe, developed market value stocks, and buybacks rank lowest in our relative strength-based matrix. Weakness in European financials drove underperformance among value stocks. Stock buybacks can be viewed as a play to leverage international economic growth and profits; however, that factor has struggled as developed market economic growth has flatlined.
  • Top 5 Contributors

    Holding Ticker Average Weight (%) Contribution to Return (%)
    Vanguard FTSE Emerging Markets ETF VWO 25.11 2.9
    iShares Core MSCI Total International Stock ETF IXUS 19.56 2.61
    iShares Edge MSCI Min Vol Emerging Markets ETF EEMV 12.73 1.33
    iShares Edge MSCI Min Vol EAFE ETF EFAV 6.22 0.75
    SPDR Dow Jones International Real Estate ETF RWX 8.54 0.58

    Top 5 Detractors

    Holding Ticker Average Weight (%) Contribution to Return (%)
    iShares MSCI Turkey ETF TUR 0.47 -0.15
    Moneyfund CASH_ISO 2.01 0
    VanEck Vectors Russia ETF RSX 0 0
    iShares MSCI All Country Asia ex Japan ETF AAXJ 7.11 0.05
    iShares Edge MSCI Intl Quality Factor ETF IQLT 7.23 0.18
    Source: FactSet as of 3/31/19 Past performance does not guarantee future results. The holdings identified do not represent all of the securities purchased, sold or recommended for advisory clients. In the chart above, “weight” is the average percentage weight of the holding during the period, and “contribution” is the contribution to overall performance during the period. To obtain the calculation methodology and a list showing every holding’s contribution to the overall composite performance during the period, contact PortfolioAnalytics@ccmg.com.

U.S. Style Opportunity Portfolio

The Style Opportunity portfolio ranks a number of U.S. equity styles and factors using Clark Capital’s relative strength-based ranking methodology, assembling a broad-based portfolio that attempts to outperform the S&P 500. 2018’s fourth quarter losers were first quarter winners in 2019 as markets rallied back impressively, regaining much of the losses that occurred between early October and Christmas Eve. The portfolio began the quarter defensively positioned in high dividend (HDV) and minimum volatility (USMV) stocks, along with a large indexed S&P 500 (IVV) position.

We knew that our relative strength-driven strategy would most likely face headwinds in the period immediately after a market sell-off when the models signal maximum defensiveness, but markets reverse towards strongly risk-on holdings. In an attempt to mitigate some of the anticipated underperformance, we slowly increased our indexed position during the fourth quarter and by default increased our market beta.

As the quarter developed, we added large-cap growth (SPYG) and mid-cap and small-cap value ETFs (MDYV and IJS) to the portfolio. Mid-cap and small-cap value stocks did not maintain their trends, and were replaced by high beta (SPHB) and minimum volatility (USMV). The following were other developments in the portfolio during the quarter:

  • Overall, the equity portion of the portfolio is overweight technology and underweight financials. The portfolio has a modest growth bias, and its P/E and price-to-cash flow ratios are about 10% over the benchmark.
  • Top 5 Contributors

    Holding Ticker Average Weight (%) Contribution to Return (%)
    iShares Core S&P 500 ETF IVV 43.13 6.3
    SPDR Portfolio S&P 500 Growth ETF SPYG 11.06 1.58
    iShares Edge MSCI Min Vol USA ETF USMV 9.25 1.14
    SPDR Portfolio S&P 500 Value ETF SPYV 3.58 0.69
    iShares Core High Dividend ETF HDV 5.98 0.68

    Top 5 Detractors

    Holding Ticker Average Weight (%) Contribution to Return (%)
    iShares S&P Small-Cap 600 Value ETF IJS 3.25 -0.72
    SPDR S&P 400 Mid Cap Value ETF MDYV 5.58 -0.61
    Invesco S&P 500 High Beta ETF SPHB 5.38 -0.05
    Moneyfund CASH_ISO 1.99 0
    Invesco Buyback Achievers ETF PKW 10.8 0.15
    Source: FactSet as of 3/31/19 Past performance does not guarantee future results. The holdings identified do not represent all of the securities purchased, sold or recommended for advisory clients. In the chart above, “weight” is the average percentage weight of the holding during the period, and “contribution” is the contribution to overall performance during the period. To obtain the calculation methodology and a list showing every holding’s contribution to the overall composite performance during the period, contact PortfolioAnalytics@ccmg.com.

Global Tactical Portfolio

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 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 therefore positive on credit risk and market risk in general), the portfolio will select from its ETF universe made up primarily of equities.

However, when the credit model turns negative, the portfolio sells equities and owns cash or Treasury bonds that are in line with the FITR portfolio’s holdings. The Global Tactical portfolio followed our credit market model’s cautionary signal and sold out of its equity positions in November 2018, and ended the year in cash.

When our credit market model turned positive towards stocks on January 10th, the portfolio bought back into equities with a 60% U.S. and 40% international mix. Since then, the portfolio has shifted towards the U.S. and now emphasizes large cap growth, technology, and the S&P 500 itself. Our credit market models remain very strong and as a result, we would expect to continue owning equity for the foreseeable future.

  • Between November 16th and our re-entry back into equities on January 10th, the iShares Core S&P 500 ETF (IVV) declined 4.8%, and the iShares Core S&P 600 Small Cap ETF (IJR) tumbled 6.2%. The Global Tactical portfolio was invested in cash over that time in an effort to provide a better risk-adjusted journey through equity markets over time.
  • The portfolio favored growth and technology stocks during the quarter, including broad technology (VGT), internet stocks (FDN), and large cap growth (SPYG). Despite the huge market rally, we found relatively few areas of the market were outperforming the S&P 500, so the index ETF remains a holding.
  • Given the scale of the equity rally, it is not surprising that the lowest ranked assets in our matrix are gold, U.S. Treasuries, and the U.S. Dollar. Developed markets value stocks (EFV) are the lowest ranking equity choice as the quarter ended.
  • Top 5 Contributors

    Holding Ticker Average Weight (%) Contribution to Return (%)
    First Trust Dow Jones Internet Index Fund FDN 17.25 2.02
    Vanguard Communication Services ETF VOX 8.81 0.92
    Vanguard Information Technology ETF VGT 7.12 0.74
    Vanguard FTSE Emerging Markets ETF VWO 8.82 0.72
    iShares Core S&P 500 ETF IVV 10.09 0.7

    Top 5 Detractors

    Holding Ticker Average Weight (%) Contribution to Return (%)
    iShares S&P Small-Cap 600 Value ETF IJS 4.23 -0.95
    Invesco Buyback Achievers ETF PKW 7.29 -0.28
    SPDR Portfolio Long Term Treasury ETF SPTL 1.6 -0.24
    iShares 7-10 Year Treasury Bond ETF IEF 3.19 -0.19
    SPDR Bloomberg Barclays Intermediate Term Treasury ETF ITE 3 -0.14
    Source: FactSet as of 3/31/19 Past performance does not guarantee future results. The holdings identified do not represent all of the securities purchased, sold or recommended for advisory clients. In the chart above, “weight” is the average percentage weight of the holding during the period, and “contribution” is the contribution to overall performance during the period. To obtain the calculation methodology and a list showing every holding’s contribution to the overall composite performance during the period, contact PortfolioAnalytics@ccmg.com.

Alternative Opportunity

We recommend that investors view the Alternative Opportunity portfolio as a source of alternative beta and exposures that still when possible looks to capture available risk premia and tactical trading gains. The product is designed to serve as a diversifier and to provide lower downside correlation during times of volatility.

The Alternative Opportunity portfolio contains a broad mix of themes which breaks down as follows: alternative-oriented mutual funds and ETFs 49.0%, tactical global equity (29.0%), fixed income (7.0%), commodities (5.0%), inverse volatility (3.0%), and cash (7.0%). The following are some important events that occurred in the portfolio during the quarter:

  • The primary purpose of the core liquid alternative portion of the portfolio is to provide non-correlated alternative exposure and includes seven mutual funds (and one ETF) in the alternative credit, long/short equity, long/short commodity, managed futures, options-based, high yield muni bond, and merger arbitrage areas. Neuberger Berman Long/Short (NLSIX – up 7.3%) and Nuveen High Yield Muni Bond (NHMRX – up 4.6%) were the best performing funds, while LoCorr Commodity Long/Short (LCSIX – down 0.2%) and Altegris Futures Evolution Strategy (EVOIX – up 1.7%) were the worst performers.
  • On the quarter, most categories in the alternative investing sphere enjoyed gains, but they were much smaller than the equity markets. The Bloomberg Commodity Index was the biggest winner up 6.3%. Much of that was driven by a 29.2% gain in the Oil ETF (OIL). Other commodities were much more muted.
  • We made one mutual fund switch within the core portion of the portfolio, selling Blackrock Global Credit Long/Short, which had underperformed, and replacing it with James Alpha Domestic Equity Hedged (JDIEX). The fund fits into the options-based category, owning equity exposure but hedging it with an options overlay. It benefits from volatility, actively trading it and harvesting what are often short-lived gains.
  • Top 5 Contributors

    Holding Ticker Average Weight (%) Contribution to Return (%)
    VanEck Vectors Oil Services ETF OIH 5.18 1.07
    First Trust North American Energy Infrastructure Fund EMLP 5.11 0.79
    iShares Core MSCI Emerging Markets ETF IEMG 7.09 0.67
    VelocityShares Daily Inverse VIX Medium-Term ETN ZIV 3.17 0.66
    FlexShares Morningstar Global Upstream Natural Resources Index Fund GUNR 4.85 0.59

    Top 5 Detractors

    Holding Ticker Average Weight (%) Contribution to Return (%)
    LoCorr Long/Short Commodities Strategy Fd Cl I LCSIX 6.66 -0.04
    Moneyfund CASH_ISO 5.58 0
    iShares iBoxx $ High Yield Corporate Bond ETF HYG 0 0
    SPDR Bloomberg Barclays High Yield Bond ETF JNK 0 0
    IQ Merger Arbitrage ETF MNA 2.56 0.01
    Source: FactSet as of 3/31/19 Past performance does not guarantee future results. The holdings identified do not represent all of the securities purchased, sold or recommended for advisory clients. In the chart above, “weight” is the average percentage weight of the holding during the period, and “contribution” is the contribution to overall performance during the period. To obtain the calculation methodology and a list showing every holding’s contribution to the overall composite performance during the period, contact PortfolioAnalytics@ccmg.com.

Fixed Income Total Return

The FITR strategy sold out of high yield bonds in mid-November 2018, in an effort to avoid the volatility that hit markets during December. On January 2nd, the portfolio moved from owning cash equivalents to owning U.S. Treasury exposure, becoming more defensive. Credit conditions and market fears dropped dramatically when Fed Chair Jay Powell reversed course on January 4th.

As a result, high yield bonds and U.S. Treasuries sharply changed directions, with high yield rising and U.S. Treasuries fading. On January 10th, we bought back into high yield as our models quickly turned around.

Both our models and high yield bonds have continually strengthened since January, despite persistent U.S. Treasury strength. Here are some additional developments during the quarter:

  • All high yield sectors were up at least 4% on the quarter, with energy lagging despite a surge in oil prices and health care and telecommunications services leading.
  • Over 50% of the current U.S. investment-grade corporate market is BBB, with the next downgrade moving them into the high yield category. Whenever the next serious economic downturn comes, there is likely to be considerable turbulence in the credit and high yield markets as former investment grade bonds become “Fallen Angel” high yield bonds. We view these developments as another potential chance to be tactical within the credit sphere.
  • Top 5 Contributors

    Holding Ticker Average Weight (%) Contribution to Return (%)
    Navigator Tactical Fixed Income Fund Class I NTBIX 50.16 1.97
    iShares iBoxx $ High Yield Corporate Bond ETF HYG 7.86 0.33
    SPDR Bloomberg Barclays High Yield Bond ETF JNK 6.99 0.31
    BlackRock High Yield Bond Portfolio – Class K BRHYX 5.23 0.24
    PIMCO Funds High Yield Fund Institutional Shares PHIYX 4.37 0.22

    Top 5 Detractors

    Holding Ticker Average Weight (%) Contribution to Return (%)
    SPDR Portfolio Long Term Treasury ETF SPTL 0.75 -0.11
    iShares 7-10 Year Treasury Bond ETF IEF 1.59 -0.1
    SPDR Bloomberg Barclays Intermediate Term Treasury ETF ITE 1.5 -0.07
    iShares U.S. Treasury Bond ETF GOVT 0.65 -0.04
    JPMorgan Ultra-Short Income ETF JPST 0.13 0.00
    Source: FactSet as of 3/31/19 Past performance does not guarantee future results. The holdings identified do not represent all of the securities purchased, sold or recommended for advisory clients. In the chart above, “weight” is the average percentage weight of the holding during the period, and “contribution” is the contribution to overall performance during the period. To obtain the calculation methodology and a list showing every holding’s contribution to the overall composite performance during the period, contact PortfolioAnalytics@ccmg.com.

Sentry Managed Volatility Portfolio

Hedging one’s equity exposure during a strong market for equities is an exercise in patience and understanding the proper role of a hedge in a broader portfolio. A V-shaped bottom in equities that included a decline during the fourth quarter and a rally most of the way back to old highs in the first quarter presented plenty of opportunities to tactically trade volatility. At the same time, the strong rally in the fourth quarter shows how temporary gains when hedging an equity portfolio actually are.

The S&P 500 enjoyed a huge rebound, and while it was down 13.5% in the fourth quarter, it was up 13.65% for the first quarter. It is essential to note that investors did not make their money back, and actually have less money in this scenario. A loss of 13.5% followed by a gain of 13.65% leaves you with only 98.3 cents on every dollar. The math does not lie – losses are very damaging to your portfolio, and they require proportionally larger gains to be made up for.

This demonstrates the importance of avoiding losses and managing risk, and for more risk averse investors, the hedging feature of the Sentry Managed Volatility portfolio is designed with these themes in mind. While the Navigator Sentry Managed Volatility Fund (NVXIX), the vehicle we use to hedge equity exposure, enjoyed a 42.1% gain during the fourth quarter decline, the first quarter’s snapback gains led to a 25.6% loss. Despite the percentage loss in the first quarter being much smaller, investors were left with 105.7 cents for every dollar if invested in the Sentry fund over the past six months.

Regarding the second half of 2019, we are more bullish, as a substantial correction will likely have run its course. As always, we remain committed to keeping protection on at all times for our clients in the Sentry program, and as we see spikes in volatility, we are looking to be opportunistic about reducing the cost of the hedge. That means taking profits on being long volatility – these profits come quickly and dramatically but disappear quickly as well.

As always, we remain committed to keeping protection on at all times for our clients in the Sentry program. As we continue to see spikes in volatility, we are looking to be opportunistic about reducing the cost of the hedge. That means taking profits on being long volatility– these profits come quickly and dramatically but disappear quickly as well.

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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