The Fairlead Tactical Sector ETF (TACK) is a model-driven exchange-traded fund built on a disciplined, repeatable process designed to adapt to all market environments. The foundation of the model is technical analysis, with a focus on indicators that identify long-term trends and major reversals. TACK’s primary objective is to harness sector leadership while working to reduce risk during equity-market downdrafts through thoughtful asset allocation. Opportunities are identified using signals from a blend of trend-following indicators, after which a quantitative momentum overlay helps refine the final portfolio.
December saw a downtick in long-term momentum behind the U.S. equity market after six consecutive months of upticks. The muted price action closed out a strong 2025 with a whimper. On a total return basis, TACK posted a slight 0.08% loss for the month, compared with a slight 0.08% gain for the SPDR® S&P 500 ETF (SPY). While TACK and the major indices were essentially flat, leadership rotated in ways that favor defensive exposure as we enter 2026.
In December, the SPDR Communication Services Sector ETF (XLC) and SPDR Industrials Sector ETF (XLI) were positive contributors for TACK, gaining 2.39% and 1.25%. The SPDR Gold MiniShares (GLDM), which TACK held all year, added another 2.29% in its fifth consecutive up-month. Yield-sensitive areas like the SPDR Utilities Sector ETF (XLU) and the SPDR Long-Term Treasury ETF (SPTL) suffered as yields saw a rebound following a four-month decline.
Our model allocations do not change from December to January. The portfolio continues to hold six sector ETFs including: communication services (XLC), industrials (XLI), technology (XLK), consumer discretionary (XLY), utilities (XLU), and healthcare (XLV), each at 12.5% weightings. In addition, the strategy is maintaining 25% exposure to “risk-off” categories across long-term U.S. Treasuries (SPTL), short-term U.S. Treasuries (SPTS), and gold (GLDM), each at approximately 8.3%. The portfolio positions TACK to participate in long-term sector leadership while counterweighting with alternative assets to help dampen drawdowns during volatile, rotational markets.
January Model Positions
Reflecting on 2025 and Positioning for 2026
TACK delivered a 10.93% total return in 2025, aligned with the fund’s primary benchmark, while it maintained lower volatility and provided meaningful downside risk management. Over the course of the year, TACK maintained average exposure of approximately 82% to equity sector ETFs in 2025, allowing for upside participation in the cyclical bull trend. In the early part of the year, SPY endured a sharp correction, falling 17.46% from February 19 through April 7. Over that period, TACK outperformed by 4.91%, consistent with the fund’s objective of limiting drawdowns. TACK has a historically low sensitivity to volatility in the broad market, exhibiting a 0.48 beta versus the S&P 500 since inception.
Yearly returns for the investable universe were not uniform, as is the case for most years. GLDM was the standout, gaining 64.20% in 2025 as a positive contributor to TACK throughout the year. XLC was another standout, having outperformed the major indices with a gain of 23.11%. In 2025, TACK avoided exposure to the SPDR Energy Sector ETF (XLE) and the SPDR Materials Sector ETF (XLB), both of which were in the bottom half of sector performance.
As 2026 kicks off, our intermediate-term indicators suggest there is elevated risk of additional corrective price action in the first quarter. This warrants reduced exposure to equities with a readiness to redeploy capital when the long-term uptrend resets itself, noting the bull market remains supported by positive long-term momentum.
Valuations tied to the AI theme remain an important consideration as we move into 2026. While AI-driven stocks provided a powerful tailwind in 2025, leadership has begun to shift as long-term momentum has moderated.
Source: Morningstar
This environment favors a more selective approach rather than indiscriminate broad exposure, reinforcing the value of a systematic, trend-based process. TACK is designed to identify inflection points and reallocate accordingly, allowing the portfolio to participate in enduring leadership while avoiding overconcentration.
We work under the assumption that the bull cycle will keep hold in 2026, but there are signs of meaningful rotation away from megacap technology stocks that may lead to more modest gains compared to 2025. TACK’s equal-weight approach to sector allocation stands to benefit from the primary uptrend, while minimizing risk after three years of narrow leadership and a steep cyclical upmove. Referencing our long-term technical indicators, we think 2026 will favor selectivity and diversification, where TACK’s model has historically added value.
Investors should carefully consider the investment objectives, risks, charges and expenses of the fund before investing. The prospectus contains this and other information about the fund, and it should be read carefully before investing. Investors may obtain a copy of the prospectus by calling 877-865-9549, emailing info@fairleadstrategies.com or it may be download here.
By Katie Stockton, portfolio manager
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The fund is distributed by Northern Lights Distributors, LLC (Member FINRA). Northern Lights Distributors, LLC, Fairlead Strategies, LLC, and Cary Street Partners Asset Management LLC are separate and unaffiliated. Cary Street Partners is the trade name used by Cary Street Partners LLC, Member FINRA/SIPC; Cary Street Partners Investment Advisory LLC and Cary Street Partners Asset Management LLC, registered investment advisers. Cary Street Partners is the Adviser for the Fairlead Tactical Sector ETF (TACK). For full disclaimers and disclosures, please view Disclaimers and Disclosures.
Fairlead Strategies, LLC is a registered investment adviser and the Subadviser for TACK. For access to the full disclaimers and disclosures for Fairlead Strategies, including their policy regarding editor securities holdings, go to https://www.fairleadstrategies.com/disclaimers-and-disclosures or email info@fairleadstrategies.com. Notice of Benchmark Change: Effective as of 07/31/2024, the Russell 1000 Equal Weight Index replaced the Morningstar Moderate Target Risk Index as the Fund’s broad-based securities market index. The Russell 1000 Equal Weight index was selected in connection with certain regulatory requirements to provide a broad measure of market performance. The Fund will retain the Morningstar Moderate Target Risk Index as a secondary benchmark.
Important Risk Information:
Investing involves risk, including loss of principal. There is no guarantee the fund will achieve its investment objective. As an actively-managed ETF, the fund is subject to management risk. The ability of the Adviser to successfully implement the fund’s investment strategies will significantly influence the fund’s performance. The success of the fund will depend in part upon the skill and expertise of certain key personnel of the Adviser, and there can be no assurance that any such personnel will be successful. Neither the Adviser nor the Subadviser has previously served as an adviser or a subadviser to a mutual fund or exchange-traded fund. As a result, there is no long-term track record against which an investor may judge the Adviser and/or Subadviser.
The TACK ETF is structured as a fund-of-funds and are subject to the same risks as the Funds they hold. Investors will incur the expenses of the Fund in addition to fees of the underlying Funds in the portfolio.
The Adviser may allocate more of the Fund’s investments to a particular sector or sectors in the market, including the following sectors: Communications Services, Consumer Discretionary, Consumer Staples, Energy, Financials, Health Care, Industrials, Materials, Real Estate, Technology, and Utilities. If the Fund invests a significant portion of its total assets in a certain sector or certain sectors, its investment portfolio will be more susceptible to the financial, economic, business, and political developments that affect those sectors than a fund that is more diversified.
The Morningstar U.S. Tactical Allocation category consists of 21 ETFs.
The Morningstar Moderate Target Risk Index is designed to meet the needs of investors who would like to maintain a target level of equity exposure through a portfolio diversified across equities, bonds, and inflation-hedged instruments. The Morningstar Moderate Target Risk Index seeks approximately 60% exposure to global equity markets.
Morningstar Category/Morningstar Category % Rank Investments are placed into Morningstar categories based on their compositions and portfolio statistics so that investors can make meaningful comparisons. Morningstar Category % Rank is a fund’s total-return percentile rank relative to all funds in the same category. The highest (or most favorable) percentile rank is one and the lowest (or least favorable) percentile rank is 100. The
Category % Rank complements the Morningstar Rating, especially for funds in smaller categories because these funds may have received a 3-star rating but could be in the top half of their category performance.
Important Terms and Definitions: A basis point is a standard measure of percentages in finance that equals 1/100th of a percent (i.e., 0.1%). A risk-adjusted return is a calculation of the profit from an investment that considers the degree of risk that must be accepted to achieve it. The risk is measured in comparison to that of a virtually risk-free investment. Our Risk-Off Classification applies when the TACK strategy invests in
Treasury ETFs and Gold Shares to reduce market exposure. MACD stands for “Moving Average Convergence
Divergence,” a common technical indicator designed to gauge price momentum.