The Market Technicians Association, the professional organization of market analysts, recently announced Charles V. Bilello and Michael A. Gayed as the recipients of its 2014 Charles H. Dow Award.
Messrs. Bilello and Gayed, director of research and chief investment strategist, respectively, at Pension Partners LLC, received the award for their white paper “An Intermarket Approach to Beta Rotation: The Strategy, Signal, and Power of Utilities.”
The white paper challenges the assertion of the efficient market hypothesis that no strategy can consistently outperform a simple buy-and-hold investment in broad stock averages over time.
Mr. Bilello said in a telephone interview that he and Mr. Gayed looked at the performance of what he called the most “boring” sector of all, the utilities sector, and found a 4% annualized outperformance from 1926 to 2013, which can't be explained using the efficient market hypothesis.
“It's the most bond-like sector of the market,” Mr. Bilello said. “When utilities move, it tells you something about the direction interest rates will go that tend to precede moves in the broader equity market. When interest rates are falling, that tends to be positive for the utilities sector and negative for the overall market. When interest rates are rising, that tends to be negative for the utilities sector and positive for the overall market.”
The Dow Award has been awarded annually for creativity and excellence in technical analysis since 1994 and carries a cash prize of $5,000. Charles H. Dow was the co-founder of Dow Jones & Co. and first editor of the Wall Street Journal.
The white paper is available at http://docs. mta.org/dow-award/2014-bilello-gayed.pdf.