GGM Wealth Advisors, a registered investment advisor, recently introduced its inaugural exchange-traded fund (ETF) named the GGM Macro Alignment ETF (GGM), aiming to outperform the S&P 500 through a strategic approach that rotates sector and investing style allocations in line with the business cycle.

The GGM Macro Alignment ETF is an actively managed fund that comprises three sector funds and two “style” funds, focusing on specific industries or strategies. These five funds are selected quarterly based on GGM’s broader economic outlook for the upcoming quarter.

The strategy behind the ETF aligns with GGM Wealth Advisors’ approach, which they have been implementing for their advisory clients since October 17, 2018. According to the fund’s prospectus, the system has shown promising results, returning 11.3% compared to the S&P 500’s 11.6% net of fees as of December 31, 2022.

The new fund’s portfolio holdings are structured based on four economic and market conditions categories, analogous to the four seasons. Jeffrey G.

Johnson, President of GGM and the fund’s portfolio manager, likens investing to packing for a vacation—appropriate preparations are essential for the journey. Similarly, choosing the right sectors and styles based on economic circumstances is crucial in investing.

While over 90 metrics are employed to determine allocation, economic growth, and inflation forecasts are the primary ones. The fund’s shares are categorized into “spring,” “summer,” “autumn,” and “winter,” mirroring economic growth and inflation trends.

The “spring” allocation is for periods when both economic growth and inflation are rising, “summer” for increasing growth and falling inflation, “autumn” for falling growth and stable inflation, and “winter” for declining growth and inflation.

The fund’s allocations for each season change over time, but consistent themes are maintained. The current fourth quarter allocation is the “winter” allocation, consisting of the Utilities Select Sector SPDR Fund (XLU), the Consumer Staples Select Sector SPDR Fund (XLP), the Health Care Select Sector SPDR Fund (XLV), iShares U.S. Medical Devices ETF (IHI), and the SPDR Bloomberg 1-3 Month T-Bill ETF (BIL). Notably, the winter portfolio allocation is the only one that holds bonds, with the other three being entirely in stocks.

Jeffrey G. Johnson emphasized the challenging nature of outperforming the S&P 500. However, the GGM Macro Alignment ETF aims to deliver superior performance with reduced risk compared to the S&P 500. The strategy has exceeded 70% of the quarters since its inception and has exhibited roughly 70% of the index’s volatility.

While GGM Wealth Advisors currently has no immediate plans to introduce more ETFs, Johnson mentioned it as a possibility if the GGM Macro Alignment ETF attracts assets and the firm identifies another strategy with the potential to outperform the market.

The firm remains committed to providing investment solutions that align with clients’ goals and expectations, focusing on delivering value and managing risk effectively.