Onyx Special 2020 Recovery - 4 ETFs (sg117)

I have used key elements from the Onyx mixes to create a new model portfolio designed specifically for a slow recovery scenario in 2020. The purpose of this model portfolio is to have greater exposure to consumer staples companies, technology companies, and health care companies. I believe these sectors may benefit during a long period of social distancing and fighting the virus itself.  We can see the strong performance of this portfolio since the beginning of the year. It can be summarized as:

Max
in 
NASDAQ 100
25%    Onyx Special 2020 Recovery (sg117) 25-75 - NEW

The D5 signal set is applied to the NASDAQ ETF, which has a maximum of 25% weight in the model portfolio. The model portfolio's 75% in low volatility ETFs is in a modified version of Onyx, including Consumer Staples stocks (XLP), Healthcare stocks (XLV), and US 10y Bonds (x2, UST).  It uses existing signal sets (developed over 7 years ago), which makes the historical simulations less vulnerable to back-fitting the solution to the time period just experienced.

I have designed this model portfolio for potential use in Phase 2 (after the peak of the relief rally) of the anticipated W-shaped market recovery pattern.  For now, just be aware that this model portfolio exists.  I will offer guidance on using it as we go through the recovery.

Additional detail about this new model portfolio follows.

Additional Detail: Onyx Special 2020 Recovery (sg117)

   Indexes (ETFs) and their Upper Risk Mix allocations:
  1. NASDAQ 100 Index (QQQ), 25%
  2. S&P500 Consumer Staples Stocks (XLP), 25%
  3. S&P500 Healthcare Stocks (XLV), 25%
  4. US 7-10y Treasury Bond Index x2 (UST), 25%
  5. Plus cash (no ETF), as needed

Portfolio rotates assets among these four ETFs favoring the most resilient and avoiding the most vulnerable over time.



Onyx Special 2020 Recovery (sg117) obtains greater technology exposure by having an allocation to the ETF QQQ, which tracks the NASDAQ 100 index. The Nasdaq 100 Index is composed of 100 of the largest international and domestic companies, excluding financial companies, that are listed on the Nasdaq stock exchange, based on market capitalization. Therefore, QQQ is heavily weighted toward large-cap technology companies and is often viewed as a snapshot of how the technology sector is trading. The growth of online commerce, new technological solutions to address workplace challenges (e.g. remote working and online meetings and classes), the growing need to provide social connections in in a socially distanced world, and investment in new technologies to solve emerging problems will likely boost the NASDAQ. The top 10 holdings of QQQ are:
  • MICROSOFT CORP
  • APPLE INC
  • AMAZON.COM INC
  • ALPHABET INC-CL A & C
  • FACEBOOK INC-CLASS A
  • INTEL CORP
  • PEPSICO INC
  • CISCO SYSTEMS INC
  • COMCAST CORP-CLASS A
  • NETFLIX INC
Consumer Staples companies tend to have steady business in difficult economic times. They may get a boost as more people eat at home and seek to make life at home comfortable and pleasant. We currently use the ETF XLP for Consumer Staples companies in the Onyx mixes.  The modification would increase the allocation to this ETF.  The top 10 holdings of this ETF are:
  • Estee Lauder Cos Inc/The
  • Mondelez International Inc
  • Coca-Cola Co/The
  • Procter & Gamble Co/The
  • Walmart Inc
  • JM Smucker Co/The
  • Altria Group Inc
  • Sysco Corp
  • Kraft Heinz Co/The
  • Archer-Daniels-Midland Co
Health Care companies are included in the Covid 2020 Recovery model portfolio.  They are likely to get a direct boost from consumer and government spending because of the pandemic. These companies might also be affected by changes in the healthcare system as we move through the recovery. Should this sector deteriorate as an investment, I will remove it from the model portfolio. We would have an allocation to the ETF XLV. Its top 10 holdings are:
  • Johnson & Johnson
  • UnitedHealth Group Incorporated
  • Merck & Co., Inc.
  • Pfizer Inc.
  • Abbott Laboratories
  • Bristol-Myers Squibb Company
  • Amgen Inc.
  • Medtronic Plc
  • Eli Lilly and Company
  • Thermo Fisher Scientific Inc.
Please see this page for the holdings of the ETFs mentioned: https://marketresilience.blogspot.com/p/etf-holdings.html
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