TAARSS says risk appetite improving, prefer US and Japanese equities. Tactical Asset Allocation Relative Strength Signal (TAARSS) Monthly Update. For December continue to prefer US equities from domestic cyclical and defensive sectors, as well as Japanese and Indian equities.
Market review
Outside commodities, November was fairly quiet. Global equities (ACWI) and US bonds (AGG) gained 1.38% and 0.66%, respectively. While Commodities (DBC) plunged by 8.51%.
TAARSS rotation strategy monthly performance review
TAARSS strategies were mixed during November. US Market, DM Country, and FI Sector were the best TAARSS strategies last month. Quarterly allocations, which suggest a diversified mix with a preference for equities and long duration in fixed income, continue to be adequate both in the multi asset and fixed income duration rotations, respectively.
Tactical positioning for December 2014 based on TAARSS
Within equities we prefer US equities and DM Intl over EM in December. Overall we would prefer North America and Asia Pacific, staying away from Latin America, and neutral towards Europe when it comes to regions. Within the US, broad allocations seem appropriate at the time. In terms of sectors, Domestic Cyclicals (e.g., Tech and Cons. Discr.) and Defensives (e.g., Cons. Staples) continue to display support. However Global Cyclicals continue to look weak. For those looking at DM countries we recommend a selective approach with preference for Asia Pacific countries, especially Japan, and away from European ones (e.g., Italy, Spain, and Switzerland). For EM equities we see India and Thailand with the strongest demand support. In fixed income signals were discrete; we prefer Corp. IG, and Munis for December; while we see the weakness in US Treasuries as a sign of increasing risk appetite. Lastly for commodities, we see weakness across the board with the positive trend in Energy being related to speculative shorting activity most likely.
