Monthly Moves: Charting Our Strategies, April 2023

Clark Capital’s Economic Gauges

Clark Capital’s Bottom-Up, Fundamental Strategies

Equity markets moved little in April as both the 10-year Treasury yield and credit spreads remained relatively stable. Small-cap stocks, mirroring the weakness in their earnings expectations, declined nearly 2% while other major indices gained 1-2%. Job cuts and cost cutting by the large-cap Tech growers have already begun to show up in reported earnings and expectations moving forward.

Margin expectations are moving up, and the antifragile growth monopolies are reasserting themselves as well-managed, profit focused enterprises. Our exposure to those names has been increasing and many of them still appear attractively priced. Year to date, four companies in the S&P 500 Index represent 60% of the gain including Meta Platforms, Inc., Nvidia Corp., Apple Inc., and Microsoft Corp. We believe the market continues to reward profitability over valuation and large to mega-cap at the expense of small-caps.

There was no Federal Reserve meeting during the month of April and the Fed’s preferred inflation measure, The Personal Consumer Expenditure Index (PCE), continued to trend lower. This led to the market trading in a very tight range with the 10-year Treasury, which closed the month 3 basis points lower than where it started, finishing at 3.43%. Corporate credit spreads followed what Treasuries did and traded in a tight range during the month. Within the fixed income portfolios, the focus was on taking advantage of the stable markets and continuing to move into what we believe are higher quality, more stable names.

Below are strategy updates from April:

All Cap Core U.S. Equity
  • Navigator® All Cap is positioned with approximately 69.3% in large-cap stocks and the remainder in mid/small-cap companies and cash.
  • During the month, we added a REIT to the portfolio. We exited our positions in a different REIT, a financial services company, and a machine industry company.
  • Albeit underweight to the benchmark, Information Technology remains the largest sector weight in the strategy at 21.9%.
High Dividend Equity
  •  The United States is the largest country weight at 90.7%, followed by Britain at 3.1% and Ireland at 2.1%. Large-cap represents 89.6% of the portfolio, mid-cap represents 8.4%, small-cap represents 0.9%, and the remainder is positioned in cash.
  • We sold a security systems services company due to what we believe were weaker sales and declining business momentum.
  • Sale proceeds and cash were invested in existing positions in a supplemental health and life insurance provider, a multinational technology corporation, a pharmaceutical and consumer goods manufacturer, an American energy company, and a multinational managed healthcare and insurance company.
  • Financials represent the largest sector weight at 17.6%, but below the benchmark at 20.4%. The next three largest portfolio weights are Healthcare, Information Technology, and Industrials at 15.8%, 11.7% and 11.5%, respectively.
International Equity ADR
  • Navigator® International Equity/ADR is positioned with 14.5% in emerging markets with the balance in developed economies and cash. Britain, Canada, France, and Japan are the strategy’s largest country weights, all ranging between 9% and 12%.
  • During the month, we added a British multinational banking and financial services company, a semiconductor manufacturer, and a German diversified industrial conglomerate.
  • We exited a Swiss multinational investment bank and financial services company, a Swiss food and beverage company, and a Canadian transportation and logistics company.
  • ADR’s exposure to China is now 4.8% and below its 7.6% weighting in the All-Country World less US benchmark.
  • Consumer Discretionary, Financials, Industrials and Information Technology are our largest sector weights.
Taxable Fixed Income
  • Within the portfolio, the focus was to take advantage of the stable markets and continue to move into what we believe are higher quality, more stable names.
  • The last of the small Financial names were sold during the month as the move away from smaller Financial firms continued.
  • The portfolio also continued to add to the more defensive Utilities sector as well as to Healthcare/Pharmaceutical names.
  • These trades increased the defensive positioning of the portfolio while also increasing duration exposure in the 10-year part of the interest rates curve. This brings the portfolio from an underweight position in that part of the curve to roughly index weighted.
Tax-Free Fixed Income
  • Flows, as reported by ICI, were negative for the month as investors withdrew over $230 million from the municipal bond asset class during April (as of 04/19/2023).
  • Our focus continues to center on consolidating positions to achieve better economies of scale and increasing block size to enhance liquidity.
  • Since late December, we have been repositioning our portfolio exposures to align more closely with benchmark weightings and we remain committed to this approach.
  • In April, we started investing excess cash and took advantage of seasonal market weakness, not only to benefit from higher rates, but also to negotiate better coupons on new issues, thereby increasing our current yield.
  • Recent sell-side reports predict a surge in negative net issuance, where demand exceeds supply, through August. If this view proves correct, we believe munis could be positioned to perform well throughout the summer.

Clark Capital’s Top-Down, Quantitative Strategies

The markets remain very resilient with the S&P 500 closing just off its high for the year. Credit conditions are stable and trends in global indices continue to improve. Our credit models are fully risk-on, so our tactical bias is overweight equity and credit.

We believe there are still risks to the near-term outlook. Issues in the banking system persist with another regional bank failure and a takeover by a larger bank. The debt ceiling and threat of default is something that will occupy the markets into the summer. Treasury Secretary Yellen said the other day that the government will run out of money by June 1st if a deal to raise the debt limit ceiling isn’t struck.

Below are strategy updates from April:

  • Long-short equities, long-short real estate, and options-based strategies are performing well in the mutual fund core, while managed futures strategies have lagged.
  • Recent tactical trades reduced our exposure to commodities and commodity equities, while increasing our cash position, which we believe now offers an appealing yield.
Fixed Income Total Return
  • The portfolio remains invested 100% in high yield, with Treasuries and cash ranking clearly below high yield in our models.
  • High yield spreads stand out as remarkably stable, particularly given the continual stresses in the banking sector.
Global Tactical
  • The portfolio is 100% risk-on, owning equities.
  • U.S. large-caps and international stocks are performing relatively well, while U.S. small-caps have lagged since February.
  • Credit markets are surprisingly resilient (thus making our risk models solidly positive), and the stresses within the banking system are so far not spreading elsewhere.
Sector Opportunity
  • The portfolio favors Technology, Communications Services, Homebuilders, and Aerospace.
  • Recent additions also include Staples and medical devices. We believe Financials in particular, along with Energy and Materials, are to be avoided.
Style Opportunity
  • The portfolio is positioned with approximately 42% in large-cap growth (via the Russell Top 200 Growth and the NASDAQ 100), with the other 56% of the portfolio indexed to the S&P 500.
  • We believe large-cap value (and its Financials exposure), mid-caps and small-caps (and their Financials and Energy exposures) are to be avoided.
U.S. Strategic Beta
  • The portfolio tilts slightly towards favoring large-cap growth over large-cap value. While that has helped performance, mid and small-cap exposure has been a detractor since February.
  • As 2023 develops, we expect to increase defense in our portfolios, given the murky economic outlook.


The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. There is no guarantee of the future performance of any Clark Capital investments portfolio. Material presented has been derived from sources considered to be reliable, but the accuracy and completeness cannot be guaranteed. Nothing herein should be construed as a solicitation, recommendation or an offer to buy, sell or hold any securities, other investments or to adopt any investment strategy or strategies. For educational use only. This information is not intended to serve as investment advice. This material is not intended to be relied upon as a forecast or research. The investment or strategy discussed may not be suitable for all investors. Investors must make their own decisions based on their specific investment objectives and financial circumstances. Past performance does not guarantee future results.

Fixed income securities are subject to certain risks including, but not limited to: interest rate (changes in interest rates may cause a decline in market value of an investment), credit, payment, call (some bonds allow the issuer to call a bond for redemption before it matures), and extension (principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase).
Foreign securities are more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards and political and economic risks. These risks are enhanced in emerging market countries.
The MSCI ACWI ex USA Index captures large and mid cap representation across 22 of 23 Developed Markets (DM) countries (excluding the US) and 26 Emerging Markets (EM) countries*. With 2,206 constituents, the index covers approximately 85% of the global equity opportunity set outside the US.
The Bloomberg US Corporate High Yield Bond Index measures the USD-denominated, high yield, fixed-rate corporate bond market.
The Bloomberg Barclays 7-10 Year Index measures the performance of the U.S. Government bond market and includes public obligations of the U.S. Treasury with a maturity of between seven and up to (but not including) ten years.
The Russell 2000 Index is a small-cap stock market index that represents the bottom 2,000 stocks in the Russell 3000.
The Russell 2000 Value Index measures the performance of the small-cap value segment of the U.S. equity universe. It includes those Russell 2000 companies with lower price-to-book ratios and lower expected and historical growth values.
The Russell 2000 Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe.
The 2 Year Treasury Rate is the yield received for investing in a US government issued treasury security that has a maturity of 2 years. The 2 year treasury yield is included on the shorter end of the yield curve and is important when looking at the overall US economy.
The 10 Year Treasury Rate is the yield received for investing in a US government issued treasury security that has a maturity of 10 year. The 10 year treasury yield is included on the longer end of the yield curve. Many analysts will use the 10 year yield as the “risk free” rate when valuing the markets or an individual security.
A municipal bond is a debt security issued by a state, municipality, or county to finance its capital expenditures, including the construction of highways, bridges, or schools. They can be thought of as loans that investors make to local governments.
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.
Non-investment-grade debt securities (high-yield/junk bonds) may be subject to greater market fluctuations, risk of default or loss of income and principal than higher-rated securities.
The securities of mid-cap companies may be subject to more abrupt or erratic market movements and may have lower trading volumes.
This document may contain certain information that constitutes forward-looking statements which can be identified by the use of forward-looking terminology such as “may,” “expect,” “will,” “hope,” “forecast,” “intend,” “target,” “believe,” and/or comparable terminology (or the negative thereof). Forward looking statements cannot be guaranteed. No assurance, representation, or warranty is made by any person that any of Clark Capital’s assumptions, expectations, objectives, and/or goals will be achieved. Nothing contained in this document may be relied upon as a guarantee, promise, assurance, or representation as to the future.
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 which is available upon request. CCM-1188


K. Sean Clark, CFA®
EVP, Chief Investment Officer