“Despite an end-of-month social media meltdown, investors may still be willing to stick with a momentum strategy,” said Stovall. “A hypothetical portfolio of an equal weighting to each of the top 10 S&P 500 sub-industries based on trailing 52-week price returns, rebalanced monthly, has outpaced the “500” on a MYD and YTD basis. In addition, the portfolio gained 13.6% per year vs. 8.1% for the S&P 500 and beat the broader market in 71% of all calendar years since 1991.”
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Stovall recommends investors research sub-industries with the highest 12-month trailing returns to extract maximum benefit in what could be a volatile August.
“The S&P 500 sub-industries with the highest 12-month trailing return include: Application Software, Department Stores, Diversified Support Services, Electronic Equipment & Instruments, Health Care Facilities, Human Resource & Employment Services, Internet & Direct Marketing Retail, Oil & Gas Refining & Marketing, Railroads and Trading Companies & Distributors,” said Stovall.
Tracking SPY, IVV and VOO will provide investors with the more broad-based exposure to the index itself–SPY is up 2.52% YTD, IVV is up 2.51% YTD and VOO is up 2.65% YTD based on Yahoo! Finance performance numbers.
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