A recent survey found that investors are concerned about their retirement prospects and it’s easy to understand why. A combination of volatility, inflation, and recessionary fears is driving investors to check their retirement balances multiple times a week. Clients are certainly also voicing their concerns to their advisors. With both the equity and the fixed income markets seeing steep declines, there haven't been many places to hide unless an advisor has been employing some type of Relative Strength strategy. By focusing on Relative Strength, also known as momentum, an advisor can remove emotion and subjectivity from their investment process and potentially see higher returns for their clients even in market environments such as this.
For over 30 years, Nasdaq Dorsey Wright has created many innovative technical indicators based on momentum using Point and Figure charting. One of the most popular is the “Technical Attribute” rating. Their research has shown that a high attribute portfolio, which includes ratings of 3-5, has a strong propensity to outperform, with the largest outperformance reserved for the highest ratings. The technical attribute ratings are composed of five distinct Point and Figure chart attributes, including four relative attributes (two vs. the market and two vs. the sector), and one absolute attribute (trend). The absolute attribute is typically useful in limiting the downside, as a purely relative approach can leave a client exposed when everything is moving down at the same time. In a year, when only one sector (Energy) has a positive year-to-date price return, employing the “Technical Attribute” rating can help advisors make their clients feel more comfortable about their retirement prospects.