ETF Pulse Check Toews Agility Shares Dynamic Tactical Income ETF

The Toews Agility Shares Dynamic Tactical Income ETF (THY) is an actively managed fund of funds that focuses on generating current income while minimizing risk. It achieves this by investing in a diverse portfolio of global high-yield bonds and equities, utilizing technical analysis to adjust its exposure. THY’s strategy is designed to provide downside protection, with the flexibility to move into defensive positions during bearish markets, including investing up to 100% in US Treasuries and other stable fixed income securities. With the global financial landscape becoming increasingly volatile, THY's tactical approach and defensive capabilities are particularly relevant for investors seeking income amidst economic uncertainty.

Basic Information
The Toews Agility Shares Dynamic Tactical Income ETF, identified by the ticker THY, was launched on June 25, 2020, under the guidance of Toews Corporation. The ETF carries an expense ratio of 1.15%, which reflects the cost of managing its diverse investment strategies. Currently, THY’s top holdings are heavily weighted towards high-yield bond ETFs, including iShares Fallen Angels USD Bond ETF (FALN) at 24.99%, Xtrackers USD High Yield Corporate Bond ETF (HYLB) at 24.73%, and iShares Broad USD High Yield Corporate Bond ETF (USHY) at 24.72%. Financials represent the largest sector exposure, accounting for 99.14% of the portfolio. Recent capital flows have shown no significant movement, with 7-day and 30-day net flow ratios both at 0.00%. The ETF has experienced negative returns over the past 6 months, 1 year, and 3 years, averaging -2.09%, -0.46%, and -0.87%, respectively. However, volatility remains relatively low, with standard deviations of 0.79% over 6 months, 1.79% over 1 year, and 1.52% over 3 years, indicating stable, albeit negative, performance.

News Summary
Recent news impacting the THY ETF includes sector and macro-level developments that are crucial to its performance. The financial sector has been experiencing heightened volatility, largely driven by fears of global market instability and ongoing US tariff negotiations. Notably, the announcement that tariff rates would soon be set for key US trading partners has contributed to market uncertainty and potential stagflation risks. Additionally, the hiring of former UK Prime Minister Rishi Sunak by Goldman Sachs as a senior adviser highlights strategic moves within the financial sector aimed at strengthening corporate and governmental ties. On the macroeconomic front, the Uruguay central bank's interest rate cuts and the Hong Kong Monetary Authority’s currency stabilization efforts may influence global bond yields. Geopolitical tensions, such as those involving Taiwan, Malaysia, and Iran, could further destabilize markets and weigh on high-yield bond investments.

Analyst Rating: Strong Sell
The Toews Agility Shares Dynamic Tactical Income ETF (THY) is assessed with a Strong Sell rating due to several critical deficiencies. The ETF’s high expense ratio of 1.15% can significantly impede its performance. Stagnant capital flows, with no net inflows over recent periods, suggest a lack of investor confidence or interest. Additionally, THY has consistently delivered negative average returns over the past six months, one year, and three years, indicating strategic or market positioning challenges. Despite low volatility suggesting stable performance, the concentration risk within the financial sector, which accounts for 99.14% of the portfolio, exposes the ETF to sector-specific risks. This lack of diversification, combined with other noted weaknesses, contributes to an overall negative outlook.

Backtest Scenario
In a backtest scenario examining the Toews Agility Shares Dynamic Tactical Income ETF (THY) during the financial market volatility of 2022 caused by inflation fears, the ETF demonstrated a relatively stable performance. During this period, THY's percentage change was -0.07%, with its lowest point at -0.34% in June and a slight recovery to 0.27% by the end of December. This performance reflects the ETF’s strategy of adapting to market conditions to maintain income generation, suggesting a conservative positioning during turbulent times.

Risk Outlook
The Toews Agility Shares Dynamic Tactical Income ETF (THY) faces several key risks across various dimensions. The ETF’s significant exposure to the financial sector, comprising 99.14% of its portfolio, is a notable risk given the current market volatility and ongoing US tariff negotiations. Additionally, macroeconomic trends such as Uruguay's monetary easing and Hong Kong's currency stabilization efforts could affect global bond yields and THY’s performance. Geopolitical tensions, particularly those involving Taiwan and Iran, pose further risks by potentially destabilizing markets and increasing investor risk aversion. Although the ETF shows low liquidity risk, changes in geopolitical or macroeconomic conditions may impact its stability. The concentration risk associated with its high-yield bond holdings could lead to performance volatility if there are credit downgrades in the underlying bonds. These factors underscore the importance of monitoring interest rate movements, geopolitical developments, and sector-specific vulnerabilities.

Conclusion
The Toews Agility Shares Dynamic Tactical Income ETF (THY) presents a cautious investment case, suitable for conservative investors seeking income with some downside protection. However, its significant sector concentration and strategic limitations warrant careful monitoring of market volatility, interest rates, and geopolitical developments. Investors should remain vigilant about the ETF's exposure to high-yield bonds and sector-specific risks to effectively assess its role in a diversified portfolio.