The SEAF (Sector ETF Asset Flows) Model: 3rd Quarter 2023 Performance Update
The SEAF (Sector ETF Asset Flows) Model
SEAF is an acronym for Sector ETF Asset Flows. The SEAF Model was created to quantitatively identify long / overweight opportunities in US market sectors. SEAF does this by “following the money” as it moves around the 11 Select Sector SPDR ETFs, which together comprise the S&P 500. Following the movement of money identifies these opportunities sooner and more accurately because, with the SEAF Model, we can see the money moving before the trends this money movement creates become apparent.
The SEAF Model has outperformed the S&P 500 in 10 of the past 13 quarters (77%) tested through September 2023.
SEAF Model Graphic
How We Derive The SEAF Model Signals
In the SEAF Model Graphic, the top two sectors in each category according to percent change in inflows are highlighted in green and the top two sectors in each category according to percent change in outflows are highlighted in red. The premise of the model is to invest in the sectors that the money is going to and to avoid the sectors that the money is leaving.
Using & Interpreting The SEAF Graphic & Accompanying Chart
The Ranking column in the SEAF Model Graphic above sorts the entire table of 11 sector ETFs according to the sum of rankings in the Trading, Tactical, and Strategic categories, from largest inflows to largest outflows. The SEAF Model Scores chart below displays this ranking according to Favored (score of 1-15, green), Neutral (score of 16-24, yellow), and Avoid (score of 25-33, red) sectors. On this chart, the actual SEAF Model Overlay signals, which include a money management component, are highlighted in a brighter shade of green.
SEAF Model Scores Chart
Performance Data
The next two tables below display performance data for the SEAF Model through June 2023. The starting date is July 2020 because we had to allow for the data from the Communication Services Select Sector SPDR Fund (XLC, the newest addition to the Select Sector SPDR ETFs) to normalize to the rest of the data. Each performance category is compared to the benchmark S&P 500 (SPX). The more significant comparisons are highlighted in green.
The first table below displays the quarter-by-quarter relative performance of the SEAF Model vs. the S&P 500, showing that SEAF has outperformed the S&P 500 in 10 of the past 13 quarters (77%) tested through September 2023.
The bottom part of the table shows that SEAF outperformed the S&P 500 (SPY) by 21.3% during the 2021 bull market, outperformed SPY by 12.0% during the 2022 bear market, and has outperformed SPY by 35.9% throughout the entire period beginning Q3 2020.
SEAF Model Relative Performance vs. S&P 500: Q3 2020 – Q3 2023
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The next table below compares quantitative performance vs. the S&P 500, showing that the SEAF Model outperformed the S&P 500 in 9 of the 10 categories shown.
SEAF Model Quantitative Metrics Q3 2020 – Q3 2023
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SEAF Model performance Highlights:
- SEAF has a significantly higher total return (see chart below) and annualized total return of the S&P 500
- with a lower maximum drawdown.
- SEAF has a lower beta (systematic risk) than the S&P 500.
- SEAF has both a higher up capture ratio (gains in up markets) and lower down capture ratio (losses in down markets) than the S&P 500.
The charts below plot the daily performance of the SEAF Model vs. the S&P 500, and the quarter-by-quarter performance of the SEAF Model vs. the S&P 500, in terms of percentage return since May 2020.
SEAF Model Daily Relative Performance vs. S&P 500: Q3 2020 – Q3 2023
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SEAF Model Quarterly Relative Performance vs. S&P 500: Q3 2020 – Q3 2023
The SEAF Model In The Media
John Kosar discussed and explained the SEAF Model in his February 16th, 2022 interview with Investors Business Daily (IBD). Click the graphic below to view it.
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Disclaimer: This is provided for information purposes only and is not intended to be a solicitation to buy or sell securities. The performance indicated from back-testing or historical track record may not be typical of future performance. No inferences may be made and no guarantees of profitability are being stated by Asbury Research LLC. The risk of loss trading in financial assets can be substantial. Therefore, you should carefully consider whether such trading is suitable for you in light of your financial condition.