S&P 100 Top/Bottom Performers & SIA Sector Scope Quarterly Review

Having spent the summer deeply engaged with daily and weekly reports, it seems fitting to utilize today's "Equity Leaders Weekly" as we have now ended the third quarter, providing a moment for a quarterly review. We will take a step back to examine the broader market landscape using a top-down methodology. Many advisors may feel that the markets are extended, having generated significant gains for their clients through the SIA Methodology. It is no exaggeration to say that 2024 has been marked by markets climbing the wall of worry, especially with the pivotal election approaching next month. At SIACharts, our methodology is centered around relative strength. We first assess the relative strength of major asset classes, followed by an analysis of various sectors and their intermarket relationships. This process culminates in our powerful reports on stocks, ETFs, and mutual funds, allowing us to identify the best investment opportunities while avoiding underperformers. Each evening, the SIACharts AI performs 10 billion calculations to compare 80,000 different companies, countries, and investments, providing an unbiased and objective ranking to highlight the most promising opportunities. Our top-level analysis monitors the risk/reward profile of equity markets compared to other asset classes for effective risk mitigation. Additionally, we conduct daily comparisons among seven major asset classes to determine which to overweight or underweight. Currently, the SIA Equity Action Call remains at 100%, keeping SIA practitioners fully invested as they navigate the challenges of 2024. Daily rankings of the seven asset classes—U.S. Equity, International Equity, Canadian Equity, Bonds, Cash, Currency, and Commodities—provide a 6 to 18-month outlook on global money flows, helping us identify the best opportunities. Presently, these classes are ranked in the following order: U.S. Equity, Canadian Equity, International Equity, Cash, Bonds, Currency, and Commodities. Diving deeper into the asset allocation tab, we can pinpoint the most promising areas within equity markets. Throughout 2024, this list has remained relatively stable, featuring U.S. Large Cap, U.S. Technology, U.S. Midcap, India Equity, and Japan Equity, with notable sectors including U.S. Financials and U.S. Industrials. Although Chinese equities have recently rallied, they have struggled to compete with other opportunities and still underperform on an intermediate-term basis. However, this resurgence could signal a developing trend worth monitoring. Meanwhile, U.S. Equity continues to shine. This streamlined analysis enables advisors to avoid the paralysis that can arise from scattered information suggesting the market is too risky and prone to decline. Advisors who were not fully invested throughout 2024 have likely incurred a substantial opportunity cost for their clients and now face a market that appears even riskier for new entries, lacking the benefit of the considerable capital gains achieved this year.

Next, let’s consider the exposures that the SIA system has provided to advisors and the results it has yielded. Given the strength of the equity markets, particularly the U.S. Large Cap market, advisors would have consulted the SIA S&P 100 Index Report to identify the top Relative Strength (RS) names for optimal exposure. While the SIA S&P 100 Report defaults to a list of stocks ranked by RS as a forward-looking exercise, we have modified the attached table to rank them based on past quarter performance. This adjustment illustrates the value of our top-down SIA relative strength methodology. The performances are impressive, featuring standout names such as 3M, delivering a remarkable 37%; Lockheed Martin at 30%; International Business Machines at 26%; Raytheon Technologies at 25%; and Walmart at 20%. In contrast, the bottom of the list highlights underperformers like Intel, down 26%; Boeing at -17%; and Qualcomm at -16%. The takeaway is clear: relative strength matters. The computational power of SIACharts AI facilitates this analysis, making it quick and straightforward. Advisors no longer need to watch hours of analytical commentary or engage in ambiguous discussions with clients; instead, we offer clear, independent information that is highly actionable.

Advanced SIA practitioners will undoubtedly refer to the SIA Sector Scopes for a quick overview of the entire market, providing a visual perspective on sector rankings based on both relative strength and the Bullish Percent Index (BPI). The BPI is a market breadth indicator that measures the percentage of stocks in a specific index that are in bullish patterns, as defined by point-and-figure charts. It is calculated by dividing the number of bullish stocks by the total number of stocks in the index and multiplying by 100. A BPI above 50% suggests positive market sentiment, while a reading below 50% indicates bearish trends. Extreme values near 100% can signal overbought conditions, while those near 0% can indicate oversold conditions. When analyzed together, these metrics create a bell curve of the market, broken down into sectors. Capital letters indicate positive BPs, while lowercase letters indicate negative BPs, with green, yellow, and red colors representing each sector's position within the relative strength matrix.This concise package provides a wealth of information, so let’s explore its implications. In July, the market was in a balanced position, with the bell curve mostly central. Favored sectors included Construction, Metals & Mines, Electronics, Insurance, Retail, Financials, and Aerospace. It's exciting to engage with advisors who took positions for their clients in these sector ETFs, along with individual stocks like Agnico Eagle, Intact, Walmart, Goldman Sachs, and GE Aerospace—hats off to you!Currently, the bell curve has shifted to the right, indicating that the markets are elevated while underscoring the percentage of companies in a bullish position. The favored sectors now include Construction, Financials, Aerospace, and Insurance, with Banking, Real Estate, Telecoms, and Conglomerates added to the list. Stay mindful of reversals in this bell curve, as they can serve as early warning signs of troubled waters ahead. If you would like to better understand these concepts, please reach out to your SIA agents, and we will be happy to assist.