We’ve previously covered Link’s Global Growth Cycle strategy, which uses OECD Composite Leading Indicator (CLI) data to time the market. The strategy has navigated the market gyrations over the last few years well, so naturally it’s gotten the attention of members. Recent strategy results follow. Learn about what we do and follow 70+ asset allocation […]
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New Feature: 10-Year Stock Market Return Forecast
We are often asked about stock market valuation models such as Shiller’s CAPE Ratio and the Buffet Indicator. These models predict long-term returns, usually forecasting the next 10 years. Our recent analysis of one such valuation model, the Aggregate Investor Allocation to Equities, motivated us to take our our own deep dive into the subject. […]
Our Take on “The Single Greatest Predictor of Future Stock Market Returns”
Readers have asked for our take on “the single greatest predictor of future stock market returns”, aka the Aggregate Investor Allocation to Equities. This indicator was first shared by Philosophical Economics back in 2013, and recently resurrected by Portfolio Optimizer (two excellent sites you should be following). A very brief primer: The Aggregate Investor Allocation […]
A Key New Momentum Measure to Consider: Distance from 1-Year High
This research was inspired by Alpha Architect’s coverage of a new paper looking at how the distance from a stock’s 1-year high has affected the performance of momentum strategies and the likelihood of “momentum crashes”. We look at the same question applied to a stock index: the S&P 500. We show that how far the […]
Mark Virag’s “Momentum Based Balancing”: Relative Momentum Taken to the Extreme
This a test of Mark Virag’s paper “Momentum Based Balancing for the Diversified Portfolio” (NAAIM Wagner Award winner, 2014). This is a relative momentum strategy that provides an interesting contrast to a popular strategy we track: FinancialMentor.com’s Optimum 3. More on this later. Backtested results from 1973 follow. Results are net of transaction costs – […]
Vintage Economic Data: Part of Our Perpetual Drive to Better Results
Some of the strategies we track use economic data, like the unemployment rate, when making investment decisions. Like 99.99% of strategy backtests you’ll encounter, we’ve always taken the shortcut of basing our historical results on that economic data as it looks today. The problem is that introduces a degree of “lookahead bias”. Economic data is […]
Hybrid Asset Allocation
This is a test of the latest tactical asset allocation strategy from Dr. Wouter Keller and JW Keuning and their paper: Dual and Canary Momentum with Rising Yields/Inflation: Hybrid Asset Allocation (HAA). Backtested results from 1971 follow. Results are net of transaction costs – see backtest assumptions. Learn about what we do and follow 70+ […]
Zakamulin’s Optimal Trend Following
This is a test of a novel trend-following strategy from the paper Optimal Trend Following Rules in Two-State Regime-Switching Models by Valeriy Zakamulin and Javier Giner. These results aren’t as eye catching as many we track, but the paper contributes some important ideas to the study of tactical asset allocation. Results trading the S&P 500 from […]
A Note About Commodities and How We Represent Them on Our Platform
We represent each asset class on our platform using the largest, most liquid ETF available (read why). Currently, we represent the asset class “diversified commodities” with the Invesco ETF DBC, but after this weekend, we’ll be changing to a different Invesco ETF PDBC. There are two reasons for this change: For non-US investors, there are […]
The Best Defensive Asset Class
In this post we look at what major asset classes have proven to be the best defensive choice in months when the market has fallen over the last 50+ years. We’ll look at multiple government and corporate bond assets, diversified commodities, gold and the US dollar. The results? As expected, a mixed bag. Investors who […]