My Trend Asset Allocation Model is a market timing model that has been running since 2013. While the model only issues buy, hold and sell signals for stocks, investors nevertheless need to make their own decisions on how much to buy and sell. Based on my out-of-sample signals, I created a model portfolio by varying the equity weight by 20% around a 60% SPY and 40% IEF benchmark. The turnover characteristics of the model portfolio is manageable, averaging 3.5 signals per year in the last five years.
The risk-adjusted returns of the model portfolio are strong. The model has beaten the 60/40 benchmark on 1, 2, 3 and 5-year time horizons, as well from inception for the period from December 31, 2013 to April 29, 2025. In addition, it was able to achieve these returns with controlled risk, equivalent to roughly an 85/15 stock/bond asset mix with 60/40 risk. As the dotted line in the chart depicting relative performance shows, the model mainly reached the superior risk-adjusted returns by sidestepping the really ugly bear markets over the study period.
- 1 year: Model 9.5% vs. 60/40 8.7%
- 2 years: Model 13.3% vs. 60/40 11.4%
- 3 years: Model 9.6% vs. 60/40 7.7%
- 5 years: Model 10.9% vs. 60/40 9.0%
Here is what it’s saying now.
The full post can be found here.
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