Summary
- Timing is crucial for investment success; static buy-and-hold strategies often underperform due to market cycles and prolonged downturns.
- Three proprietary portfolio models—Active Premium, Piotroski-Graham Value, and Active ETF Sector Gauge—consistently outperform the S&P 500 using timing and sector rotation.
- Current signals favor value stocks and sectors like gold, utilities, healthcare, and biotechs, while technology (notably NVDA) shows short-term weakness.
- Combining market, sector, and stock-specific signals enhances risk-adjusted returns, offering actionable frameworks for both long-term and tactical investors.
- Momentum, value, and fundamental trading strategies each can deliver strong returns as we prepare our new portfolios for 2026 volatility.
Introduction
The goal of forecasting is not to predict the future, but to tell you what you need to know to take meaningful action in the present” ~ Paul Saffo
Timing matters, and it matters greatly. I have spent the last 35 years trading, researching, and constructing algorithms to identify and leverage the value across fundamental, technical, and behavioral finance models. Of the ten portfolio models designed for optimal portfolio mixes for members to beat the market at Value & Momentum Breakouts, eight come from enhancing well-tested anomaly research in published financial journals. All of the models continue to outperform the S&P 500 in live forward testing here on Seeking Alpha, and again this year.
Rotations and Bubbles
Weird things can happen without bubbles, but bubbles cannot happen without weird things.” ~ Owen Lamont, Acadian Asset Management
As I discussed in my recent podcast with Rena Sherbill, “Follow The Signals, Don’t Chase The Price”.
Somewhere over the past decades of trading and researching the markets, I discarded the notion of being a pure buy-and-hold investor. People may do well in buy-and-hold approaches, but they invariably have to ride through some major downturns to arrive with good results in the end. Back in the days when I relied on well-known investment firms for advice, I often received more coaching about my patience than any valuable insight about market behavior. Like many of you, my cynicism and curiosity about the financial markets led me to test, experiment, and run studies across thousands of different trading approaches, algorithms, and models. Here’s a 10-minute view of what I have learned over the years.
The thing to consider is that we rarely ever see market leaders from the prior year be market leaders for the coming year. ~ JD Henning, January Podcast
Let’s start with a brief review of the Callan Periodic Table, showing the performance of key indices over the past 20 years. Without a doubt, there is very little consistency year to year with investment types and sector leadership. This year, Gold and Utilities are among the top-performing segments, while Crude Oil has declined the most.
Before we get into the next potential rotation and examples of what is occurring in the markets ahead of 2026, let’s consider the critical factor of time. Many investors are told that the S&P 500 averages 8% annual returns if you’re patient. The reality is that the 20-year average returns of the market depend heavily on where you enter the measurement period since 1900 that produced the average 8% returns. Many 20-year periods delivered much less than 8% average returns.
