June 2025 Update: Size & Style Responsive Tax Aware SMA Strategy

The Size & Style Responsive Tax Aware SMA Strategy returned +4.1% in June, delivering a strong absolute gain, though slightly trailing the broader market’s performance. To understand where the difference came from, we look at the return attribution:

Attribution Breakdown

Contributors to Performance:

• Market Return: +5.0%

• Size & Style Allocation: –0.2%

• Stock Selection: +0.2%

• Interaction: –0.9%

• Strategy Return: +4.1%

Market performance was the dominant driver this month, contributing +5.0%. Allocation decisions across size and style factors detracted slightly (–0.2%). Stock selection added a modest +0.2%, but the interaction effect was the largest headwind at –0.9%.

What does interaction mean? It captures how stock selection performs within the specific size and style allocations. For example, while we had exposure to certain size/style buckets that made sense based on our models, the securities chosen within those buckets underperformed their peers, amplifying the effect. This is different from broad allocation—it's about selection within the allocation context.

Long-Term Perspective

While short-term results often hinge on style trends, we build this strategy around longer-term cycles. The charts below show how size and style leadership rotates, often when it's least expected.

• Size Cycle: Small-cap stocks have underperformed large-caps for several years, and relative valuations are near multi-decade lows. Historically, this setup has preceded strong reversals in favor of smaller stocks.

• Style Cycle: Growth has dominated most of the past decade. While value has shown bursts of leadership, sustained outperformance remains elusive—so far.

  
  
  
  

  Short-Term Technical Read

  We track relative strength between SMID-cap ETFs and the S&P 500 Equal-Weight Index (RSP) to isolate market breadth from mega-cap dominance. Here’s what stands out:

  • Against SPY: Both small- and mid-caps remain in longer-term downtrends.

  • Against RSP: The picture is different. Mid-caps have mostly moved sideways since 2022. Small-cap relative weakness accelerated in Q2 2025, but we’re now seeing a slight bounce. Prior to Q2, small-cap performance had been relatively flat for more than a year.

    
    
    

  This divergence supports our case for using equal-weight comparisons when analyzing positioning. The broader market is increasingly bifurcated.

  Final Thoughts

  Markets continue to reward mega-cap growth, but the SSR Strategy remains positioned for cyclical rotation toward smaller and more value-oriented companies. Our rules-based process avoids short-term chasing while staying responsive to structural shifts.

  Let us know if you'd like to review positioning or how this strategy fits within a broader portfolio. We're always happy to talk through it.

  
  

  The SSR Tax Aware model remains ahead of the Russell 3000 over the full period since inception, with slightly lower trailing 3-year numbers but stronger 5-year and year-to-date performance.

  Compliance Disclosure:
  The Size and Style Responsive Tax-Aware strategy seeks to manage after-tax returns by incorporating tax considerations into trade decisions. For example, when possible, the strategy may defer realizing short-term gains to achieve long-term tax treatment, subject to client-specific constraints and objectives. Tax impact is a factor in implementation, but it does not override the strategy’s investment objectives.
  Past performance, whether actual or hypothetical, does not guarantee future performance. Investment results and principal value will fluctuate, and clients' investments, when redeemed, may be worth more or less than their original cost. This communication is intended solely for financial professionals and advisors and is not meant for use with clients or the general investing public.