In the contemporary investment landscape, where market unpredictability can seem like a new normal, a disciplined, rules-based investment approach offers a compelling and rational alternative to traditional, discretionary methods. The MSCM Trend Plus strategy is built on the foundational principle of actively managing risk by systematically removing human emotion from the decision-making process. This approach is not focused on forecasting the future but on responding dynamically to current market conditions, with the overarching goal of avoiding material losses.
The Trend Plus strategy’s framework continuously analyzes the U.S. equity market to determine the strength and direction of existing trends. This is a significant departure from subjective judgment, which can often be influenced by fear and greed. This approach provides a clear, objective signal: when it confirms a robust uptrend, the strategy allocates capital to low-cost equity ETFs to participate in market growth. Conversely, when it detects a weakening trend or the beginning of a downturn, the strategy pivots to a defensive stance. This shift involves reallocating capital to non equity ETFs historically resilient during periods of market decline. This dynamic and systematic process of rebalancing is designed to provide the portfolio with crucial downside protection, a feature that can be vital in volatile market environments.
While past performance is not necessarily indicative of future results, the effectiveness of this disciplined approach is clearly demonstrated through its performance across different market cycles.
In periods of significant market contraction, when broad market indices have experienced substantial downturns, this rules-based strategy has shown its ability to mitigate losses. While other, more static portfolios have faced steep declines, the Trend Plus strategy’s proactive risk management has enabled it to preserve capital. This protective quality is a primary benefit, designed to offer investors a more stable and predictable experience. Equally important, the strategy is not solely focused on defense. When markets reverse and begin to rally, the strategy is designed to swiftly re-engage with equity exposure, so that the portfolio is positioned to capture gains during the subsequent uptrend. This ability to protect capital and participate in market rebounds showcases the strategy’s versatility and robustness.
Interested in learning more? Contact Grant Morris for more information on how a rules based strategy can help you navigate today’s markets. Up to date information on our Trend Plus strategy, including access to our full factsheet, can be found here.
Past performance is not necessarily indicative of future results. Investing involves risk. Principal loss is possible. McElhenny Sheffield Capital Management (MSCM) is a registered investment adviser with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. Important information pertaining to MSCM’s advisory operation, services, risks, and fees is set forth in MSCM’s current Form ADV Part 2A brochure, a copy of which is available upon request or at www.adviserinfo.sec.gov or www.mscm.net.
There can be no assurance that the strategy will be implemented as designed, or profitable, or that clients will not lose money. The tactical strategies use a variety of market indicators and stop levels that seek to identify upward or downward trends in the U.S. equity markets. If an indicator or stop level fails to detect significant downturns in the market, the strategy will continue to be exposed to underlying positions that could lose value during such downward periods. Similarly, if the indicators fail to timely identify a reversal of a downward trending market, the strategies will continue to be exposed to defensive Exchange Traded Funds (ETFs) at a time when there is significant appreciation in the equity markets. Either scenario could result in the strategies underperforming other strategies that do not employ these strategies. There can be no guarantee the tactical strategies will correctly or timely identify the industries, sectors, or asset classes that will outperform during a given quarter or that the strategies will correctly or timely identify market trends. The tactical strategies invest in other investment companies and ETFs which result in higher and duplicative expenses. Investing in ETFs are subject to risks that the market price of the shares will trade at a discount to its net asset value (“NAV”), an active secondary trading market will not develop or be maintained, or trading will be halted by the exchange in which they trade. Brokerage commissions will reduce returns. Nothing in this presentation is intended to be relied on as investment, legal, or tax advice. Investors should consult their tax advisor or legal counsel for advice and information concerning their particular situation.