Equities maintained trend strength in August and avoided breakdowns that would have triggered a shift to cash. Portfolios are positioned for relative strength in small-caps and other neglected areas of the market. The rally appears to be broadening ahead of seasonal weakness, and we anticipate cyclical sectors to outperform on pullbacks into year-end.
Financials, healthcare, and industrial sectors make up a large portion of the value index, and show greater upside potential versus growth stocks over the intermediate term. The chart below shows value approaching support relative to growth, albeit within a long-term downtrend.