iQ Recession 10 Model
INVESTMENT OBJECTIVE
The iQ Recession 10 Model seeks to generate long-term returns in excess of the S&P 500 Index with less downside risk during recessions by selecting stocks of sectors that have historically outperformed when the economy has struggled.
RULES-BASED SELECTION PROCESS
The iQ Recession 10 Model implements the following rules-based process:
Begin with a starting universe of S&P 1500* stocks from the following sectors:
Consumer Goods
Discount Retailers
Utilities
Aerospace
Healthcare
Apply a multi-factor screening process that includes the following factors and select the top ten:
Share Buyback
Earnings Momentum
Asset to Price Ratio
Growth Flow to Price Ratio
The Model reconstitutes every Feb, May, Aug and Nov.
Investing in recession-ready stocks
Investing in recession-ready stock sectors can help reduce the impact of economic downturns on an investment portfolio. Recession-ready sectors are less affected by economic downturns, as they provide essential products and services that consumers need even during tough times. These sectors include:
1. Healthcare: People still need medical care during a recession, making healthcare stocks a defensive play.
2. Consumer Staples: Products like food, household supplies, and personal care items are essential regardless of economic conditions.
3. Utilities: Companies that provide essential services such as electricity, gas, and water are generally stable during a recession.
4. Defense: Defense stocks, particularly those focused on government contracts, may continue to do well during a recession as governments may prioritize spending on defense.
It's important to note that while these sectors are generally considered to be more resilient during a recession, there are no guarantees in the stock market, and any investment carries risks.
For a recession-ready moderate portfolio, the iQ Recession 10 Model may be combined with the iQ ETF Recession Hedge Model.
*The S&P 1500, or S&P Composite 1500 Index, is a stock market index of US stocks made by Standard & Poor's. It includes all stocks in the S&P 500, S&P 400, and S&P 600. This index covers approximately 90% of the market capitalization of U.S. stocks.