Follow the Money: VFGU Investment Strategy

VFGU Investment Rationale – Chief Technical Analyst Buff Dormeier, CMT®

Fourth Quarter 2026, Selective Participation as the Generals Advance and the Ranks Reassess

Every investment process is ultimately defined by a single question: What data most deserves our trust?

Many investment approaches begin with forecasts. Others respond primarily to economic releases, earnings expectations, valuations, headlines, or price movements. Each provides useful information. Yet none consistently answers the question we believe matters most:

Where is capital actually moving?

That question sits at the heart of the Volume Factor investment process.

In our work, price is not the market’s full discounting mechanism. Price is the market’s testimony. Price is the effect of trading activity. Volume represents the force behind that activity. Hence volume leads price. Capital flows either confirm or contradict conviction, serving as the polygraph to the market’s testimony.

Institutional capital rarely changes direction in a single session. Accumulation and distribution tend to unfold gradually. Following those flows helps us evaluate not simply where prices have traveled, but whether sufficient capital is moving beneath the surface to sustain the advance. Our objective is therefore not to forecast every market turn. It is to observe the market’s developing character and allow the weight of the evidence, rather than emotion or narrative, determine portfolio positioning.

This evidence-driven philosophy remains central to the VFGU process. We seek to identify where capital is accumulating, where it is being withdrawn, and whether those flows confirm or contradict the message being delivered by price. As leadership, breadth, and institutional sponsorship evolve, the Volume Factor Global Unconstrained portfolio is designed to evolve with them, increasing participation where capital is demonstrating conviction while remaining prepared to reduce risk when the evidence begins to deteriorate.

VFGU Q4 2026 Executive Summary

The fourth quarter begins with an unusual contradiction. Price has paused, breadth has deteriorated, but capital continues to advance. The S&P 500 recently hesitated near resistance while Capital Weighted Volume and Capital Weighted Dollar Volume are establishing new all-time highs week after week. From our perspective, this remains the strongest evidence supporting the bull case.

Yet the market beneath the capitalization weighted indexes tells a considerably more complicated story. September saw the Invesco QQQ Trust Series 1 advance 4.54%, while the iShares Russell 2000 ETF declined -4.36%, the Invesco S&P 500 Equal Weight ETF declined -4.40%, and the Schwab U.S. Dividend Equity ETF fell -6.55%. At the same time, the NYSE Advance Decline Line deteriorated sharply and broke beneath its March lows. In battlefield terms, the generals advanced while the troops, lieutenants, and brass commanders retreated.

This changes the character of the opportunity set. Q3 was deliberately positioned for broadening leadership. Smaller companies, value, dividends, international markets, and diversified factors were emphasized as participation expanded beyond the largest capitalization stocks. Small cap strategies alone represented approximately 31% of the listed Q3 portfolio.

Q4 acknowledges that the broadening campaign has come under pressure. The portfolio does not abandon the broader market, nor does it simply chase the generals. Instead, VFGU moves toward a more balanced structure designed for a transition tape, where leadership can rotate quickly, dispersion remains elevated, and the capitalization-weighted indexes may conceal substantial weakness underneath.

The Q4 portfolio therefore emphasizes:

• Selective participation in renewed large cap growth leadership
• Greater mid cap participation while reducing dedicated small cap risk
• Continued value discipline
• Greater emphasis on quality and financially durable companies
• Multiple dividend and cash flow strategies
• Diversified factor exposure rather than reliance on capitalization weighting
• More streamlined international diversification
• Continued protection against excessive technology concentration

The Q4 portfolio contains 25 ETF positions weighted at approximately 3.92% each and 2% cash. Our posture can be summarized simply: Attempt to participate in strength. Seek to diversify the sources of return. Follow the capital.  Recognize divergence.

Q4 Portfolio Adjustments

The fourth quarter portfolio represents a material evolution from Q3. Q3 positioned more aggressively for the possibility that broadening leadership would become the next stage of the bull market. That thesis worked through portions of the second and third quarters, but September challenged it. Rising Treasury yields, weakening breadth, and renewed mega cap leadership have placed considerable pressure on smaller companies, dividend shares, and the equal-weight market. Our September 28 Flash Update noted that the 10-year Treasury yield had moved above 5%, while the generals strengthened and small caps, equal-weight equities, and dividend stocks weakened.  The most significant Q4 changes are:

• Dedicated small cap exposure has been sharply reduced. Q3 allocated approximately 31% of the listed portfolio across multiple small cap strategies. Q4 retains the Global X Russell 2000 ETF, but removes most of the specialized small cap growth, value, ESG, and dividend allocations.

• Mid caps move into a larger strategic role. BNY Mellon US Mid Cap Core Equity ETF remains, while Vanguard Morningstar Mid Cap ETF, First Trust Mid Cap Value AlphaDEX Fund, Invesco S&P MidCap 400 Pure Value ETF, and ProShares S&P MidCap 400 Dividend Aristocrats ETF broaden the middle capitalization tier.

• The generals return to the portfolio, but not to unquestioned command. Vanguard Morningstar Mega Cap Growth ETF and Schwab U.S. Large Cap Growth ETF reintroduce direct exposure to the market’s strongest leadership. First Trust Nasdaq 100 Select Equal Weight ETF participates in the Nasdaq leadership theme while reducing dependence upon the largest individual companies.

• Value remains deeply embedded. Invesco S&P 500 Pure Value ETF remains, joined by iShares Morningstar Value ETF, iShares MSCI EAFE Value ETF, First Trust Mid Cap Value AlphaDEX Fund, Invesco S&P MidCap 400 Pure Value ETF, and fundamentally weighted exposure through Schwab Fundamental U.S. Large Company ETF.

• Quality becomes more explicit. Fidelity Quality Factor ETF and iShares MSCI USA Quality Factor ETF introduce dedicated quality positions, while Xtrackers Russell US Multifactor ETF maintains diversified exposure to quality, value, momentum, low volatility, and size factors. Fidelity describes FQAL as prioritizing profitability, stable cash flows, and sound balance sheets, while QUAL emphasizes high return on equity, stable earnings, and low debt.

• Dividend strategies remain important, but move up the capitalization spectrum. The Q4 structure emphasizes diversified U.S., mid cap, large cap, dividend growth, high dividend, sector based, and global dividend strategies.

• International exposure is simplified. Rather than maintaining numerous specialized international and emerging market positions, Q4 centers international participation around the iShares MSCI ACWI ex U.S. ETF, iShares MSCI EAFE Value ETF, and State Street SPDR S&P Global Dividend ETF.

This is not a forecast that one style will dominate Q4. It is an attempt to construct a portfolio capable of participating across several plausible leadership outcomes while avoiding excessive dependence upon any one of them.

Q4 Strategic Investment Themes: Data Translation

Theme One, Give the Generals a Seat, Not the Entire War Room

The most important tactical change in Q4 is the selective return of large cap growth. Recent capital flow data makes ignoring the generals increasingly difficult. The Invesco QQQ Trust Series 1 has reasserted leadership, recently reaching new intraday and closing highs. Its volume profile has also improved. At the same time, Capital Weighted Volume and Capital Weighted Dollar Volume have continued advancing to record highs.

The Volume Factor Global Unconstrainted portfolio therefore accepts an important reality: If the generals break through resistance while institutional capital continues advancing, capitalization weighted growth may continue carrying the headline indexes higher.

But participation is not capitulation. According to investment strategist Jim Paulsen, there have been six major technology leadership cycles since 1926.  In those previous cycles, technology leadership has historically been followed by lengthy periods of relative underperformance. The contemporary technology leadership cycle, beginning around 2006, has already been unusually long. He further notes that historical technology laggard cycles have tended to last even longer than leadership cycles. The objective is therefore to participate in demonstrated strength without allowing a narrow group of companies to dictate the portfolio’s entire outcome.

Portfolio Implementation

Vanguard Morningstar Mega Cap Growth ETF, MGK
Provides targeted participation in the largest U.S. growth companies and allows VFGU to participate should the generals continue commanding the advance. Vanguard describes MGK as diversified exposure to the largest U.S. growth stocks.

Schwab U.S. Large Cap Growth ETF, SCHG
Adds a second large cap growth approach and provides participation in companies demonstrating growth characteristics across a broader large cap universe.

First Trust Nasdaq 100 Select Equal Weight ETF, QQEW
Maintains participation in Nasdaq leadership while using equal weighting to reduce the extreme company concentration embedded in conventional capitalization weighted Nasdaq exposure.

Together, these holdings give the generals meaningful representation without allowing them to monopolize command.

Theme Two, Moving Up the Capitalization Curve Without Abandoning the Troops

Q3 made a substantial commitment to small companies because market breadth was expanding and the troops appeared prepared to participate in the advance. That evidence has now changed. The Russell 2000 has retreated to critical technical support, and higher Treasury yields have increasingly pressured smaller companies. The October 5 Flash Update noted that the troops had broken through 280 before reclaiming the level, with approximately 275 representing the more important underlying trend support.

Rather than completely abandoning smaller companies, Q4 reduces the size of that wager and shifts significant capital toward the middle capitalization tier. This is an important distinction. Mid cap companies can provide meaningful exposure to broader economic participation while generally possessing greater scale and financial maturity than the smallest companies. If interest rates eventually moderate, they may participate in a renewed broadening advance. If rates remain elevated, their stronger position between large and small companies may prove valuable.

Slower economic momentum, moderating inflation, and weakening economic surprise data may eventually place downward pressure on Treasury yields. That is not yet what the market is delivering, but it creates an important alternative scenario should the rate environment reverse.

Portfolio Implementation

Global X Russell 2000 ETF, RSSL
Maintains direct participation in the small cap universe without the multiple specialized small cap exposures held during Q3. Global X describes the fund as exposure to as many as 2,000 U.S. small cap equities.

BNY Mellon US Mid Cap Core Equity ETF, BKMC
Retains broad mid cap participation and serves as a bridge between large company stability and smaller company economic sensitivity.

Vanguard Morningstar Mid Cap ETF, VO
Adds broad, diversified exposure across the U.S. mid cap universe.

First Trust Mid Cap Value AlphaDEX Fund, FNK
Adds a rules-based value orientation within the middle capitalization tier.

Invesco S&P MidCap 400 Pure Value ETF, RFV
Targets companies within the S&P MidCap 400 exhibiting particularly strong value characteristics.

ProShares S&P MidCap 400 Dividend Aristocrats ETF, REGL
Combines mid cap participation with companies that have increased their dividends for at least 15 consecutive years, blending participation with financial discipline.

Northern Trust Morningstar U.S. Market Factor Tilt ETF, TILT
Maintains broad U.S. equity participation while systematically increasing exposure toward smaller capitalization and value stocks.

Collectively, this represents an important Q4 adjustment. The troops remain on the battlefield, but VFGU is no longer asking them to carry as much of the offensive.

Theme Three, Value and Quality Become Strategic Counterweights

A mature bull market creates a different investment problem than a young bull market. Early in the cycle, simply gaining exposure can be sufficient. Later in the cycle, valuation, balance sheet strength, earnings durability, cash flows, and portfolio construction can matter considerably more.

The extraordinary earnings growth supporting the most popular market leadership could begin moderating as expectations become increasingly difficult to surpass. That does not mean growth leadership must end. It does mean VFGU should not require extraordinary earnings assumptions from a narrow segment of the market for the portfolio to succeed.

Portfolio Implementation

Xtrackers Russell US Multifactor ETF, DEUS
Combines quality, value, momentum, low volatility, and size within one systematic framework, diversifying the sources of potential return.

Schwab Fundamental U.S. Large Company ETF, FNDX
Weights large U.S. companies by fundamental measures rather than capitalization alone, creating a systematic counterweight to capitalization concentration. Schwab notes that its methodology can provide value and yield factor exposure.

Fidelity Quality Factor ETF, FQAL
Emphasizes profitability, stable cash flows, and stronger balance sheets.

iShares MSCI USA Quality Factor ETF, QUAL
Emphasizes high return on equity, stable earnings, and relatively low leverage.

iShares Morningstar Value ETF, ILCV
Provides large and mid cap value exposure using earnings, book value, sales, cash flow, and dividend related metrics.

Invesco S&P 500 Pure Value ETF, RPV
Retains the Q3 portfolio’s concentrated large cap value expression.

The combination creates a more balanced portfolio architecture. Growth provides offensive capability, while value, quality, and multifactor exposures seek to diversify the conditions under which the portfolio can participate.

Theme Four, Dividends and Cash Flow Remain Core Return Drivers

Dividends remain a significant component of the Q4 strategy. This is not simply an income decision. Companies capable of consistently distributing and growing cash to shareholders frequently demonstrate characteristics that become increasingly valuable as market cycles mature, established profitability, capital discipline, durable cash generation, and management accountability. Q4 deliberately diversifies this exposure across several dividend methodologies rather than relying upon one high yield strategy.

Portfolio Implementation

ProShares S&P MidCap 400 Dividend Aristocrats ETF, REGL
Adds dividend growth discipline within the mid cap universe.

ALPS Sector Dividend Dogs ETF, SDOG
Maintains a sector diversified dividend and valuation approach.

State Street SPDR S&P Dividend ETF, SDY
Provides exposure to established dividend paying U.S. companies.

State Street SPDR Portfolio S&P 500 High Dividend ETF, SPYD
Targets 80 higher yielding members of the S&P 500, providing a distinct income-oriented return driver.

VictoryShares Dividend Accelerator ETF, VSDA
Maintains the Q3 emphasis on companies with the potential to grow dividends rather than focusing upon current yield alone.

State Street SPDR S&P Global Dividend ETF, WDIV
Extends dividend discipline globally and requires a history of maintaining or increasing dividends

Higher interest rates remain a tactical challenge for dividend equities, and the recent weakness of the dividend brass commanders reinforces that concern. But VFGU does not own dividend companies because interest rates must decline. The Volume Factor Global Unconstrained portfolio owns several dividend disciplines because cash distributions, dividend growth, valuation, and capital allocation can provide return drivers distinct from the earnings expectations embedded within the market’s most expensive growth companies.

Theme Five, Global Diversification and Multiple Ways to Own the U.S. Market

Diversification means more than owning many securities. It means reducing dependency upon a single market narrative, a single capitalization segment, a single region, or a single index construction methodology. The Q4 VFGU portfolio simplifies international exposure but does not abandon it. The recent breakout in the U.S. Dollar Index creates a near term challenge for international equities and commodities, which argues against an indiscriminate international overweight. At the same time, international diversification remains valuable precisely because leadership changes across cycles.

Portfolio Implementation

iShares MSCI ACWI ex U.S. ETF, ACWX
Provides broad exposure to developed and emerging markets outside the United States.

iShares MSCI EAFE Value ETF, EFV
Provides developed international exposure with an explicit value orientation.

State Street SPDR S&P Global Dividend ETF, WDIV
Combines U.S. and international dividend growers within one global framework.

Within the United States, Q4 also maintains several alternative approaches to conventional capitalization weighting:

ProShares S&P 500 Ex Technology ETF, SPXT
Maintains large cap participation while explicitly excluding the information technology sector, providing a direct counterweight to portfolios dominated by technology.

State Street SPDR S&P 500 Fossil Fuel Reserves Free ETF, SPYX
Provides another broad large cap allocation constructed differently from the conventional S&P 500 universe.

The diversification theme is increasingly important when the difference between owning “the market” versus owning a small number of its largest constituents becomes unusually large.

Positioning Summary

The Q4 VFGU portfolio reflects a market that still deserves participation, but increasingly demands selectivity. The strongest bullish evidence resides beneath price itself. Capital Weighted Volume and Capital Weighted Dollar Volume continue making new all time highs. Institutions have not abandoned the field. Indeed, the supply lines remain one of the strongest elements of the current bull case.

But market structure has become less healthy. The generals are advancing while the troops and broader ranks are fighting to hold their trenches. Breadth has deteriorated. Rates remain restrictive. The dollar has strengthened. The capitalization weighted indexes increasingly tell a different story than much of the market underneath them.

Therefore, Q4 VFGU is positioned for:

✓ Continued institutional capital sponsorship
✓ Selective large cap growth participation
✓ Reduced dependency upon small caps
✓ Greater mid cap participation
✓ Value discipline
✓ Quality balance sheets and earnings
✓ Dividend growth and cash flow
✓ Diversified factor exposure
✓ Selective international participation
✓ Reduced dependence upon any single index weighting methodology

The Market’s Volume Factor Health Assessment / Risk Outlook

Indicator	Current Assessment	Portfolio Implication
Primary Price Trend	Positive	Maintain equity participation
Capital Weighted Volume	New all time highs	Strong bullish confirmation
Capital Weighted Dollar Volume	New all time highs	Institutional sponsorship remains strong
Market Breadth	Deteriorating	Major area of concern
NYSE Advance Decline Line	Below prior support	Broadening thesis under pressure
Mega Cap Growth Leadership	Strengthening	Selective participation warranted
Small Cap Leadership	Weak, testing support	Dedicated exposure reduced
Equal Weight Leadership	Weakening	Monitor for stabilization
Dividend Leadership	Correcting	Retain selectively, avoid reliance on one style
Treasury Yields	Elevated	Pressure on broader market participation
U.S. Dollar	Strengthening	Near term headwind for international assets
Overall Portfolio Posture	Constructive but selective	Participate, diversify, monitor divergence

The contrast with Q3 is important. Q3 began on strong and improving breadth, while institutional capital measures were weakening. Q3 ended with almost the opposite conditions as Capital Weighted Volume and Capital Weighted Dollar Volume strengthened substantially, while breadth has deteriorated. That reversal explains much of the Q4 repositioning.

The Two Roads Ahead

The bullish scenario is relatively straightforward. The generals break through resistance with strong volume. Capital Weighted Volume and Capital Weighted Dollar Volume continue making new highs. The troops hold support. Equal weight equities and dividend stocks stabilize. Breadth repairs itself.

Under that scenario, the current market advance could evolve into a healthier formation. The Q4 VFGU portfolio has exposure to the generals, but also maintains meaningful mid cap, value, quality, dividend, multifactor, and international participation should the broader army eventually rejoin the offensive.

The more dangerous scenario is subtler. This is no longer a young bull market. Mature bull markets require the structure of broad participation, not merely the strength of a few elite generals. In the short run, the bulls’ best tactical outcome may be for the generals to break out and pull the capitalization weighted S&P 500 Index higher with them. That could extend the advance and improve the headline battlefield report.

Longer term, however, the bulls’ most dangerous scenario, and the bears’ best opportunity, would be for the generals to break out, lifting the capitalization weighted S&P 500 Index while the troops, lieutenants, brass commanders, and broader market measures break down beneath support. That would produce an increasingly severe divergence between the narrow command and the broader army. The index could continue climbing even as the market beneath it deteriorates. That is precisely why price cannot be our only witness. Price provides the testimony. Volume provides the polygraph. Breadth tells us how many soldiers remain in the fight.

Risk Command

The strongest argument for continued participation remains unmistakable: Capital Weighted Volume and Capital Weighted Dollar Volume continue establishing new highs. The Capital supply lines remain intact.

The strongest argument for caution is equally clear: leadership has narrowed, breadth has broken down, small caps have tested critical support, equal weight equities have weakened, and dividend stocks have retreated.

For the bulls, the best development would be a renewed broadening of participation while capital flows remain strong. For the bears, the best opportunity would be a generals-only breakout that conceals continued deterioration beneath the index. VFGU does not need to predict which scenario wins.

The VFGU portfolio is constructed to participate if capital continues advancing while diversifying across company size, style, quality, income, factors, and geography. If the weight of the evidence deteriorates materially, the Volume Factor Risk Overlay remains prepared to become increasingly defensive.

The mission remains the same: Follow the money. Respect the data. Manage risk objectively.

Closing Perspectives

Successful investing is not about identifying the winning narrative before everyone else. It is about recognizing when the evidence supporting a narrative changes. Q3 entered the battlefield expecting broader participation to continue developing. Q4 begins with a different message. The generals have regained command, the broader ranks have retreated, yet the institutional supply lines remain remarkably strong. The appropriate response is neither to abandon the field nor blindly chase the generals. It is to adapt.

The Q4 VFGU portfolio therefore broadens the ways in which the strategy can participate while narrowing its dependence upon the areas where the evidence has weakened. Growth returns to the portfolio, but alongside value. Small caps remain, but with substantially less responsibility. Mid caps assume a larger role. Quality becomes explicit. Dividends remain important. International exposure becomes simpler. Multiple weighting methodologies seek to prevent any one market narrative from controlling the portfolio. Markets evolve. Our allocations must be willing to evolve with them.

Follow the capital. Watch the ranks. Defend the critical ground. And seek to manage risk before it manages you.

IMPORTANT DISCLOSURES

Kingsview Wealth Management (“KWM”) is an investment adviser registered with the Securities and Exchange Commission (“SEC”). Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed.

Kingsview Investment Management (“KIM”) is the internal portfolio management group of KWM. KIM asset management services are offered to KWM clients through KWM IARs. KIM asset management services are also offered to non KWM clients and unaffiliated advisors through model leases, solicitor agreements and model trading agreements. KWM clients utilizing asset management services provided by KIM will incur charges in addition to the KWM advisory fee.

This material has been prepared by Kingsview Wealth Management, LLC. It is not, and should not, be regarded as investment advice or as a recommendation regarding any particular security or course of action. Opinions expressed herein are current opinions as of the date appearing in this material only. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate their ability to invest for the long term.

This information does not address individual situations and should not be construed or viewed as any type of individual or group recommendation. Be sure to first consult with a qualified financial adviser, tax professional, and/or legal counsel before implementing any securities, investments, or investment strategies discussed.

Past performance is no guarantee of future results. There are risks associated with any investment strategy, including the possible loss of principal. There is no guarantee that any investment strategy will achieve its objectives.

Diversification does not ensure profit or protect against loss.