Long-term returns for US Treasury bond funds with a constant maturity (like IEF, TLT and SHY) have been quite predictable simply using initial Treasury yields as an estimate. This observation was popularized by John Bogle. Here’s an excellent recent look from Portfolio Optimizer. How predictable? Below we’ve shown the intial yield on 10-Year US Treasury […]
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Super-Secret Proprietary Black Box Strategies
Note: This is a rare non-geeky, non-quantitative, stream of thought blog post. Because we’re so deep into this world of Tactical Asset Allocation (TAA), we’re sometimes asked for our thoughts on such-and-such black box TAA strategy. By “black box” we mean a strategy for which the trading rules are not disclosed to investors (nor to […]
Tactical Asset Allocation Performance During the 2022 Bear Market
As a whole, Tactical Asset Allocation (TAA) did not manage losses during the 2022 bear market as well as it has during previous downturns. Individual strategies varied and some did well, but a primary function of TAA is loss management, and any failure to do so is worth analyzing further. In this post, we’re going […]
Testing “TrendYCMacro” from Ďurian and Vojtko of Quantpedia
This is a test of the “TrendYCMacro” strategy from the paper Avoid Equity Bear Markets with a Market Timing Strategy from Ďurian and Vojtko of Quantpedia. The strategy combines trends in price, the slope of the yield curve and key economic indicators to switch between US equities and cash. Backtested results from 1927 follow. Results […]
Revisiting “Link’s Global Growth Cycle” Strategy
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 […]
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 […]