The 5-asset momentum model from my newsletter is down just 5.6% this month through yesterday. Buy-and-hold for that portfolio is down 18%, same as the S&P. The strategy shed stocks and REITs on the first trading day of March, as those assets closed February below their 12-month SMAs, and is holding bonds and gold.
“This portfolio starts as an all-weather allocation of five asset classes: US stocks, foreign developed markets stocks, REITs, corporate bonds, and gold (SPY, EFA, VNQ, LQD, GLD). Simply holding those is a robust strategy, but it is improved by applying a momentum filter independently to each of the five assets. Portfolio drawdowns are reduced to bond-like levels, while long-term performance meets that of equities.
The rules are simple: every month we check to see if each asset is above its respective 12-month simple moving average. If so, we stay in that asset. If not, we invest that fifth of the portfolio in Treasuries (IEF). Most of the time we’re long most of the five assets, and we make a few trades per year on average. This strategy requires more attention than the value portfolio, but the returns are much better. The tax profile is favorable, as we take many short-term capital losses, while most of our gains are long-term.”
Good to see it working as intended real time in a nasty environment, the ultimate out-of-sample test.