SAN DIEGO--(BUSINESS WIRE)--Reality Shares, an Exchange-Traded Fund (ETF) issuer and research firm, is anticipating that the second-longest bull market in history is likely over, and a significant selloff within the next three to six months is extremely likely based on its Guard Indicator turning negative on Nov. 9.
The Indicator looks at all sectors in the S&P 500, and if at least three show signs of breaching both the volatility and momentum trigger thresholds, it signals a potential bear market.
Not just three, but four market sectors have officially turned negative.
The Utilities sector turned negative on Nov. 2, down 13 percent from its peak, followed by the Consumer Staples sector on Nov. 8. After the market closed on Nov. 9, Real Estate became the third sector to turn negative, shortly followed by the Health Care sector on Nov. 18.
“Over the past 17 years, we've seen bearish markets during three separate periods: Sept. 1999 to May 2003, Jan. 2008 to July 2009 and Sept. 2015 to May 2016,” said Eric Ervin, CEO of Reality Shares. “The average return of the S&P 500 during those three periods was negative 18.41 percent. These are the market scenarios the Guard Indicator with its rules-based methodology was created to detect, alerting investors to potential increases in market volatility and significant market downturns.”
The Indicator is also signaling short-term weakness for the Telecommunications and Consumer Discretionary sectors.
“As a result of the current low interest environment, yield-thirsty investors piled cash into these sectors in the hopes of generating income – thus creating a dangerous bubble that is on the cusp of bursting,” Ervin said. “The problem with owning these stocks strictly for higher yield is that prior sector outperformance was not supported by underlying corporate earnings. Should earnings decline, yield-chasing investors may be subject to dividend cuts as these sectors become more overvalued.”
When the Indicator suggests the potential for a broader market decline, the Reality Shares GARD ETF triggers its dynamic hedging strategy and automatically transitions to a long/short weighting allocation to reduce the impact of market downturns. Today, the ETF is 50 percent long expected dividend growers, and 50 percent short expected dividend cutters.
About Reality Shares
At Reality Shares, we are focused solely on dividend growth investing and offer a range of alternative ETFs that pinpoint and capitalize on investment in dividend growth and the stocks that are most likely to increase their dividends, as well as avoiding those that are more likely to cut their dividends. Our rules-based, forward-looking methodology sets us apart in the market and allows investors to access and harness the power of dividend growth investing. Our proprietary DIVCON scoring system systematically ranks companies’ future dividend growth prospects based on a weighted average of seven quality factors that are correlated to dividend growth.
For more information, visit www.realityshares.com.
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S&P 500: A broad-based, unmanaged American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ
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Reality Shares Advisors, LLC is the Investment Advisor. ALPS Distributors, Inc. is the Distributor for the Fund. Reality Shares Advisors, LLC and ALPS Distributors, Inc. are not affiliated.
Shares of the Fund are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Market Price is based on the midpoint of the bid/ask spread at the close of the market and does not represent the returns an investor would receive if shares were traded at other times.
This material is prepared by Reality Shares, Inc. (“Reality Shares®”), and all material or information shared herein is for informational or educational purposes only. Nothing in this material shall constitute an offer or solicitation to purchase or sell any securities or funds. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance is not indicative of future performance and is no guide to future returns. This material contains general information only and is not intended to represent general or specific investment advice. This material may contain forward-looking statements which involve certain risks and uncertainties. The information contained in this material is derived from proprietary and nonproprietary sources deemed to be reliable, but may not necessarily be all-inclusive and are not guaranteed as to accuracy. No part of this material may be reproduced without the prior written consent of Reality Shares. Reality Shares® is a registered trademark of Reality Shares, Inc.