All Private Client accounts have important updates that take effect January 1st, 2026. Please click here to learn more.

2026 SMI MODEL ADJUSTMENTS AND NEW STRATEGY INTRODUCTION
Your SMI Private Client Portfolio Managers continually research opportunities to add value and improve upon the Private Client portfolios and strategies. As a result of that work, we typically notify you of strategy changes and adjustments to our existing models around this time each year. These changes will be implemented over the next couple of weeks and may take up to a month to be fully implemented. Those impacted will be able to view any changes to your portfolio within your Private Client dashboard. This notification is informational, and no action is required.
This notification contains:
  • An introduction to a new strategy called Alternatives
  • Changes to four existing strategies (Sector Rotation, EDAA, Just-The-Basics Indexing, and Bond Upgrading)
An important note on standard vs custom models:
Because each of our standard models targets a specific level of risk, our portfolio managers make ongoing allocation adjustments that are designed to add value while maintaining each standard model's risk level. In contrast, since custom models have been created by the client, our portfolio managers must maintain those fixed strategy allocations and cannot change them without the client's direction and a newly signed Investment Policy Statement ("IPS").
Because of these limitations with custom models, the new Alternatives strategy will only be added to custom models upon request.
In addition, the changes being made to Sector Rotation and EDAA outlined below are only applicable to (and available in) standard models and not available within custom models. For these reasons, we encourage investors with custom models to consider choosing our standard models to benefit (both now and in the future) from our portfolio managers' ongoing standard model enhancements.
New Strategy Introduction:
ALTERNATIVES
A new Alternatives strategy is being introduced, which is designed to be non-correlated to the US stock market and provide an additional level of diversification. The primary holding will be QDSIX, which seeks to add value by tactically investing among six alternative mutual funds. Important considerations to this approach include the following:
  1. Only standard models will automatically receive this new strategy. Clients with custom models can have it added upon request and after a new IPS is signed.
  2. Our proprietary Alternatives indicator can move this allocation from QDSIX into one or more equity funds.
  3. Most of the standard models will target this new strategy at 2% of the portfolio, but the target can range from 0% to 10%.
Existing Strategy Changes:
1. SECTOR ROTATION (SR)
In addition to Alpha SR and Beta SR, the Sector Rotation Strategy will now include the ability to invest in one or more cryptocurrency ETFs. This new piece of SR is called Crypto SR. Important considerations to this approach include the following:
  1. Crypto SR will only be implemented within the aggressive end of our standard models (models 8, 9, and 10). Due to the complexity involved, this will not be available in custom models.
  2. When our proprietary indicators are strong, one or more cryptocurrency ETFs will be purchased; otherwise one or more Sector Rotation funds will be purchased.
  3. Although the typical target of the cryptocurrency is approximately 1 to 2% of the portfolio, the target can range from 0% to 5%.
  4. At their discretion, the portfolio managers may add Crypto SR to additional standard models in the future.
2. ENHANCED DYNAMIC ASSET ALLOCATION (EDAA)
Within the most conservative models, EDAA will now include the ability to invest in more Gold or short term bonds beyond that of the typical EDAA approach. Important considerations to this approach include the following:
  1. This will only be implemented within the conservative end of our standard models (models 1, 2, and 3). Due to the complexity involved, this will not be available in custom models.
  2. Our proprietary indicators will toggle this allocation between Gold ETF(s) and short term bond ETF(s).
  3. Although the typical target of this additional allocation is 3% of the portfolio, the target can range from 0% to 10%.
  4. At their discretion, the portfolio managers may expand this approach to EDAA to additional standard models in the future.
3. JUST-THE-BASICS INDEXING (JTBI)
JTBI will now contain Large Cap, Small / Mid Cap, and International exposure. In addition, the Large Cap portion of JTBI will now use QQQM in addition to IVV. Important considerations to this approach include the following:
  1. The Large Cap category will target 50% QQQM and 50% IVV, however we will not sell existing IVV holdings to achieve this target if it will generate significant taxable gains.
  2. Both standard and custom models will receive the QQQM addition within the Large Cap category.
  3. If your custom model indicates specific percentages to Large Cap and Small/Mid Cap, you will not receive additional exposure to International without a new signed IPS.
4. BOND UPGRADING
The change in Bond Upgrading was announced in the December 2025 Monthly Strategy Update. In the current market environment, both traditional Bond Indexing and momentum-based Bond Upgrading are expected to face significant headwinds. This new approach initially uses five complementary, professional bond managers and their funds. The initial allocations equally weight them, however the managers may replace the funds, change the number of funds used, and change the weighting among them when warranted:
  • Weitz Core Plus Income (WCPB) - Core bond exposure similar to the Bloomberg U.S. Aggregate Bond Index.
  • Carillon Reams Unconstrained (SUBFX) - Deep value, opportunistic team that stays liquid and buys dislocated bonds when they trade at discounts.
  • Eaton Vance Global Macro Absolute Return (EGRIX) - Active foreign bond and currency strategy.
  • North Square Preferred & Income Securities (QTPI) - Invests heavily in preferred stocks and convertible bonds.
  • Leader Capital High Quality Income (LCTIX) - Focuses on asset-backed securities (ABS), collateralized by things like consumer loans, leases, or receivables.
The securities listed in all strategies are subject to change at the Portfolio Managers' discretion.
Standard Model Adjustments:
Because each of our standard models targets a specific level of risk, our portfolio managers have made allocation adjustments that are designed to add value while maintaining a similar level of risk. If you are currently invested in a standard model, you can view your new allocation by logging into your SMI Private Client dashboard.
As always, please contact us if you have any questions or concerns.
Blessings,
Mark Biller
Senior Portfolio Manager