The Fairlead Tactical Sector ETF (TACK) is a model-driven exchange-traded fund built on a disciplined, repeatable process designed to adapt to all market environments. The foundation of the model is technical analysis, with a focus on indicators that identify long-term trends and major reversals. TACK’s primary objective is to harness sector leadership while working to reduce risk during equity-market downdrafts through thoughtful asset allocation. Opportunities are identified using signals from a blend of trend-following indicators, after which a quantitative momentum overlay helps refine the final portfolio.
December Model Positions
A pullback unfolded in November, with the SPDR® S&P 500 ETF (SPY) declining 5.76% from the October high before recovering its losses into Thanksgiving week, finishing with a modest total return of 0.20% for the month. TACK mirrored that outcome, ending the month largely unchanged (-0.04%), though it demonstrated relative strength during the early-month weakness.
Behind the neutral returns, meaningful sector-level shifts occurred in November. In a notable departure from its trend of leadership, the Technology Select Sector SPDR® Fund (XLK) declined 4.81% on a total return basis. This weakness hints at a potential transition within the technology sector, especially as megacap performance becomes increasingly uneven, noting Alphabet Inc. (GOOGL) landed in the top 5% of S&P 500 performers for the month, while NVIDIA (NVDA) fell into the bottom 5%.
We believe the increased volatility marks the onset of a significant correction for the equity market, the first since April’s low. Intermediate-term momentum has weakened, and breadth has deteriorated, so we would have an eye toward risk management as 2025 comes to a close. The seasonal relief rally may prove to be a “B-wave” in a typical A-B-C correction, as illustrated in the accompanying diagram.
In response to increasing risk, TACK’s model shifted its 12.5% allocation in the Financial Select Sector SPDR® Fund (XLF) to the more defensive Health Care Select Sector SPDR® Fund (XLV). The chart of XLV, pictured on the following page, offers a visual case for the change.
Healthcare Momentum Shift
The Health Care Select Sector SPDR® Fund (XLV) gained an impressive 9.30% in November on a total return basis, its fourth- strongest month since its inception in December 1998. Our technical indicators suggest last month’s performance marks the beginning of a lasting bullish momentum shift for the healthcare sector, supporting XLV’s addition to the portfolio.
A key driver of this view is the Moving Average Convergence/Divergence Indicator (MACD), which recently flashed a ‘buy’ signal on the monthly chart of XLV. The MACD had been on a ‘sell’ signal since the start of the year, one reason TACK avoided the healthcare sector much of this year. We believe the crossover in the monthly MACD reflects a positive shift in long-term momentum for XLV and a reversal of the downtrend that had been in place since September 2024. We expect the bullish shift in trend to be a tailwind for XLV in 2026.
November’s advance in XLV resulted in strong outperformance relative to SPY. The ratio of XLV to SPY has turned higher from a deeply oversold condition to suggest 2026 will bring better relative performance for XLV and its underlying healthcare stocks.
Want to learn more about TACK’s ability to navigate different environments? Visit the fund’s website or inquire at [email protected].
By Katie Stockton, Portfolio Manager
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Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Current performance may be lower or higher than quoted. Returns include changes in share price and reinvestment of dividends, if any. For fund performance information current to the most recent month-end, please call 1-877-865-9549.
Total return and value will vary, and you may have a gain or loss when shares are sold. Returns include changes in share price and reinvestment of dividends, if any.
Market returns are based upon the closing price at 4:00 p.m. Eastern time, when the NAV is normally calculated for ETFs. Your returns may differ if you traded shares at other times. NAV returns represent the closing price of underlying securities.
Investors should carefully consider the investment objectives, risks, charges and expenses of the fund before investing. The prospectus contains this and other information about the fund, and it should be read carefully before investing. Investors may obtain a copy of the prospectus by calling 877-865-9549, emailing [email protected] or it may be download here.
The fund is distributed by Northern Lights Distributors, LLC (Member FINRA). Northern Lights Distributors, LLC, Fairlead Strategies, LLC, and Cary Street Partners Asset Management LLC are separate and unaffiliated. Cary Street Partners is the trade name used by Cary Street Partners LLC, Member FINRA/SIPC; Cary Street Partners Investment Advisory LLC and Cary Street Partners Asset Management LLC, registered investment advisers. Cary Street Partners is the Adviser for the Fairlead Tactical Sector ETF (TACK). For full disclaimers and disclosures, please view Disclaimers and Disclosures.
Fairlead Strategies, LLC is a registered investment adviser and the Subadviser for TACK. For access to the full disclaimers and disclosures for Fairlead Strategies, including their policy regarding editor securities holdings, go to https://www.fairleadstrategies.com/disclaimers-and-disclosures or email [email protected]. Notice of Benchmark Change: Effective as of 07/31/2024, the Russell 1000 Equal Weight Index replaced the Morningstar Moderate Target Risk Index as the Fund’s broad-based securities market index. The Russell 1000 Equal Weight index was selected in connection with certain regulatory requirements to provide a broad measure of market performance. The Fund will retain the Morningstar Moderate Target Risk Index as a secondary benchmark.
Important Risk Information:
Investing involves risk, including loss of principal. There is no guarantee the fund will achieve its investment objective. As an actively-managed ETF, the fund is subject to management risk. The ability of the Adviser to successfully implement the fund’s investment strategies will significantly influence the fund’s performance. The success of the fund will depend in part upon the skill and expertise of certain key personnel of the Adviser, and there can be no assurance that any such personnel will be successful. Neither the Adviser nor the Subadviser has previously served as an adviser or a subadviser to a mutual fund or exchange-traded fund. As a result, there is no long-term track record against which an investor may judge the Adviser and/or Subadviser.
The TACK ETF is structured as a fund-of-funds and are subject to the same risks as the Funds they hold. Investors will incur the expenses of the Fund in addition to fees of the underlying Funds in the portfolio.
The Adviser may allocate more of the Fund’s investments to a particular sector or sectors in the market, including the following sectors: Communications Services, Consumer Discretionary, Consumer Staples, Energy, Financials, Health Care, Industrials, Materials, Real Estate, Technology, and Utilities. If the Fund invests a significant portion of its total assets in a certain sector or certain sectors, its investment portfolio will be more susceptible to the financial, economic, business, and political developments that affect those sectors than a fund that is more diversified.
The Morningstar U.S. Tactical Allocation category consists of 21 ETFs.
The Morningstar Moderate Target Risk Index is designed to meet the needs of investors who would like to maintain a target level of equity exposure through a portfolio diversified across equities, bonds, and inflation-hedged instruments. The Morningstar Moderate Target Risk Index seeks approximately 60% exposure to global equity markets.
Morningstar Category/Morningstar Category % Rank Investments are placed into Morningstar categories based on their compositions and portfolio statistics so that investors can make meaningful comparisons. Morningstar Category % Rank is a fund’s total-return percentile rank relative to all funds in the same category. The highest (or most favorable) percentile rank is one and the lowest (or least favorable) percentile rank is 100. The
Category % Rank complements the Morningstar Rating, especially for funds in smaller categories because these funds may have received a 3-star rating but could be in the top half of their category performance.
Important Terms and Definitions: A basis point is a standard measure of percentages in finance that equals 1/100th of a percent (i.e., 0.1%). A risk-adjusted return is a calculation of the profit from an investment that considers the degree of risk that must be accepted to achieve it. The risk is measured in comparison to that of a virtually risk-free investment. Our Risk-Off Classification applies when the TACK strategy invests in
Treasury ETFs and Gold Shares to reduce market exposure. MACD stands for “Moving Average Convergence
Divergence,” a common technical indicator designed to gauge price momentum.
