After a strong close to 2025, the first quarter of 2026 brought a reminder that markets don’t move in a straight line — and that a rules-based rotation strategy is designed precisely for moments like this one.
Q1 2026: Navigating a Difficult Quarter
The Q1 2026 portfolio entered the quarter with $105,590 in value and held five positions: SPY, QQQ, XLF, EEM, and SLV. By quarter’s end, the portfolio stood at $102,120.59, reflecting a −3.98% return for the period.
The quarter was broadly challenging for equities. U.S. large-cap growth bore the brunt of the pressure, with QQQ declining −5.85% and SPY pulling back −4.78%. Financials (XLF) were the hardest hit among the holdings, dropping −10.22% as rate sensitivity and sector rotation away from banks weighed on the group.
Not everything moved lower. Emerging markets (EEM) remained nearly flat at +0.98%, and silver (SLV) was the standout contributor, adding +3.45% and cushioning the portfolio against steeper losses. This is exactly the kind of cross-asset diversification the strategy is built to provide — when domestic equities come under pressure, exposure to commodities and international markets can act as a meaningful offset.
Q1 2026 Holdings Summary
| Symbol | Name | Entry Price | Shares | Open Value | Close Amount | Gain / Loss | Weight |
| SPY | S&P 500 ETF Trust | $683.01 | 31 | $21,118 | $20,107.88 | -4.78% | 19.69% |
| QQQ | Nasdaq 100 Fund | $613.04 | 34 | $21,118 | $19,882.69 | -5.85% | 19.47% |
| XLF | Financial Select Sector SPDR ETF | $54.99 | 384 | $21,118 | $18,959.73 | -10.22% | 18.57% |
| EEM | Emerging Market Fund | $56.24 | 375 | $21,118 | $21,324.52 | +0.98% | 20.88% |
| SLV | Silver Fund | $65.87 | 321 | $21,118 | $21,845.76 | +3.45% | 21.39% |
| Total | $105,590 | $102,120.59 | -3.98% | 100.00% |
What This Quarter Reinforces
A down quarter is not a strategy failure — it is part of the reality of participating in markets. What matters is how the portfolio is positioned coming out of it.
- Rotation works both ways. The strategy limits exposure by holding only five selected positions at a time. A static portfolio would have held the same laggards with no mechanism to exit them. The model reallocates based on what is actually showing strength, not what performed well last year.
- Diversification across asset classes earned its place. SLV and EEM together prevented a much steeper drawdown. The strategy’s willingness to move beyond domestic equities into commodities and international funds continues to smooth returns over time.
- One down quarter does not define a strategy. Over the course of 2025, the portfolio grew from $72.8K to $105.6K. A quarter of −3.98% in a difficult market environment is a normal part of a longer compounding journey — not a reason to abandon the process.
Q2 2026: New Positions, Fresh Setup
Following the quarterly rebalance, the portfolio has rotated into a new set of five ETFs for Q2 2026. The starting value of $102,120 has been allocated equally across the new holdings.
| Symbol | Name | Entry Price | Shares | Open Value |
| SPY | S&P 500 ETF Trust | $655.36 | 31 | $20,424 |
| QQQ | Nasdaq 100 Fund | $584.35 | 35 | $20,424 |
| IWM | Russell 2000 ETF | $249.53 | 82 | $20,424 |
| XLE | Energy Select Sector SPDR ETF | $58.97 | 346 | $20,424 |
| EEM | Emerging Market Fund | $57.23 | 357 | $20,424 |
| Total | $102,120 |
Several things are worth noting about this quarter’s rotation:
- XLF exits, XLE and IWM enter. Financials lost their place in the top five after a weak Q1. Energy (XLE) and small-caps (IWM) have emerged as areas of relative strength — a meaningful shift in market leadership worth watching.
- EEM carries over. Emerging markets held their ground in Q1 and continued to rank among the strongest relative performers. The model keeps what is working.
- SPY and QQQ remain. Despite a rough Q1 for both, large-cap equities still rank in the top five. Lower entry prices coming out of the pullback means this quarter’s positions start from a more favorable basis.
The Q2 setup reflects broad equity exposure, international diversification, and a sector tilt toward energy — positioning the portfolio to participate if the market stabilizes and leadership broadens.
Results for Q2 2026 will be published at quarter-end. As always, this strategy follows a rules-based process — allocations are driven by relative strength data, not forecasts or opinions.
