Sector Ratings and Model Portfolio Update - 11/30/2023

The Grindstone Intelligence Sector Ratings are based on our top-down technical approach. We assess the relative strength and trends within each sector and gauge risk appetite in the broader market to determine which sectors we think are best positioned to lead going forward. The ratings below reflect our views over the coming month.

The US Equity Model Portfolio is a hypothetical allocation designed to align with our Sector Ratings and seeks to outperform the S&P 500 Index over the long-term. Our positions are chosen with investment horizons ranging from a few weeks to several months. The Model will invest only in exchange-traded funds that track sectors, industries, or categories of stocks. No individual stocks or cash positions will be used in the Grindstone US Equity Model Portfolio. Changes to the model will be communicated via email to subscribers and posted on our site.

There’s nothing bearish about all-time highs.

We talked at length yesterday about the relative strength in Information Technology stocks, and today we’re upgrading the sector to Overweight from the Equalweight rating we’ve had in place since the sector entered its consolidation phase over the summer.

We’re a bit wary of the weak seasonality for Tech stocks in December, but the risks to the upside outweigh those to the downside.

We’re also upgrading the Materials sector, primarily on the upside potential we see for the miners.

You can review our note from earlier this week on precious metals. The upgrade accompanies a downgrade to Underweight for the Energy sector. These two sectors tend to trade on similar dynamics, but when we compare the two directly, we can see that Materials is gaining the upper hand.

We’ve become incrementally more negative on the Health Care sector, where the average stock is all the way down to 2014 levels compared to the S&P 500. Until we see signs of breadth improvement here, this group is best left alone.

Here’s a complete look at our current ratings:

As a result of the changes to our sector ratings, we’re making the following changes to our Model Portfolio.

We’re adding the Global X Silver Miners, which just broke out to 4-month highs against the S&P 500. That follows a pair of failed breakdowns below last summer’s trough and a bullish momentum divergence over the past several months. A return to the spring highs in this ratio would mean an additional 30% of outperformance vs. the benchmark index.

Another addition is the Amplify Online Retail ETF, which is trying to complete a major bottom.

It may be a bit early for IBUY, but we like the risk/reward proposition after it underperformed by 70% during 2021-2022. After a year spent building this base, we think it’s poised to finally start showing some relative strength.

That’s all for today. Until next time.