July 31, 2025
Elev8 Model Input Scores: August 2025
The table below shows the Elev8 model’s scores for August. Info Tech and Industrials sectors scored the highest in our model for the second month in a row. We’ve rolled over our zero weight positions from June to August and we are out of the Healthcare, Materials and Real Estate sectors in August for the 4th month in a row. What’s new this month is we added a tactical exposure to lower vol. stocks by going overweight the Utilities Sector. This was due to some near-term softness in rates, softer seasonals for the next 3-months, and a wide performance spread that has developed between high beta and lower vol. stocks off the April low for equities. Our Elev8 inputs are as follows:
Key: Pattern = L/T (1yr+) Price Pattern of the Sector ETF, Mean Rating = simple average of 1-6 ratings (buyàsell) of all stocks within the sector, WTD Mean Rating = Cap Weighted Sector Constituent rating, OB = Overbought, OS = Oversold, N=Neutral
Model Input Commentary
The S&P 500 traded to new all-time highs in July reconfirming the bull trend for equities. The risk-on trade has been obvious since the early April lows for the index though we started to see some buying fatigue in the back half of the month. USD continues to demonstrate weakness against other major currencies keeping us interested in the Energy Sector as a tactical play. Interest rates as proxied by the US 10-year yield and commodities prices represented by the Bloomberg Commodities Index have traded sideways over the last three months and aren’t affecting our input decisions in August.
Macro analysis and stock level Characteristics which comprise our top down and bottom-up process have us constructive on equities moving forward. Our stock level process which is trend following has the highest scores for Technology, Industrials and Utilities stocks. The latter exposure is aided by our tactical overlay which was triggered by overbought conditions on the S&P 500 and among high beta exposures. We think there is a rising chance of near-term profit taking in August
At the macro level, we’re expecting a bounce from equities to continue though overbought conditions are a near-term concern. Interest rates have settled into their sideways range between 4.2 and 4.7% and commodities prices remain contained in July. We continue to see a preference for larger stocks over smaller and Growth over Value when equity prices are moving higher at the index level. Info Tech and Industrials sectors carry the strongest intermediate price and performance trends into August, and we are staying long both due to continued strong input scores from our model and favorable macro conditions at the index level.
Low volatility (Staples, Utilities, Real Estate and Healthcare) showed some signs of stabilization in July, but Real Estate and Healthcare sectors still had the lowest input scores in the model despite our tactical overlay. Commodities adjacent exposures (Energy and Materials) remained lackluster with the Materials sector the weaker of the two. We kept Energy sector exposure as a hedge against exogenous shocks to the commodities complex. With equities at overbought conditions, we think a tactical downside hedge is appropriate and we’ve expressed that through a long position in XLU for August.
NOTE: We do have a logistical constraint to our portfolio. We instituted a base $10,000 cash portfolio alongside our model to track and model trading costs. Because of this, we don’t always have the ability to precisely match the model scores to the fund’s weighting position.
Elev8 Sector Rotation Model Portfolio: August Positioning vs. Benchmark Simulated S&P 500
Previous Positioning as of last Rebalance: June 30, 2025
For August we’ve bar-belled our exposure to stay long the Technology Sector and Industrial Sector while going to a tactical short in the Consumer Discretionary Sector and boosting out Utilities Sector position to a long in case equities correct from current overbought conditions. We remain constructive on the longer-term setup for equities, but details around tariff implementation remain unclear and we feel an optimistic forward scenario is being priced in. We think there is potential for near-term profit taking, though we aren’t getting any obvious sell signals from our indicators.
Conclusion
The bull trend extended into July, but concerns around potential inflation remain and equities enter August near overbought territory. We would expect some backing and filling after buyers bid stocks from the April trough to new all-time highs. That said, the macro picture remains benign for equities, and strong demand for Technology stocks and AI exposures generally persist. We don’t want to bet against those trends continuing despite some tactical concerns.
About Elev8
We introduced the Elev8 Sector Rotation Model in August of 2024. Here’s a look under the hood at the inputs we use to score the 11 GICS Sectors for April and our resulting positions. The model includes up to 14 indicators that range from:
- Stock Level Technical Characteristics
- Macro-overlays:
- equity trend (S&P 500)
- interest rate trend (10yr US Treasury Yield)
- commodities trend (Bloomberg Commodities Index)
- USD trend (vs. EUR & Broad Currency Indices)
- Relative performance vs. the benchmark S&P 500
- Overbought/Oversold oscillator studies
We use the largest passive sector-based ETF by AUM ($) for each sector as our proxy for Elev8 sector positions. We select 8 out of 11 Sectors each month and have no exposure to the 3 with the lowest scores in our model.
Data from Factset Research Systems Inc.
