Not the Simplest Asset Class ETF Momentum Strategy

Does adding international equity exposure and an escape to “cash” enhance performance of a relative momentum strategy that switches between stock and U.S. Treasury bond exchange-traded funds (ETF)? In his February 2018 paper entitled “Simple and Effective Market Timing with Tactical Asset Allocation Part 2 – Choices”, Lewis Glenn updates and considers two extensions to a strategy summarized in “Simplest Asset Class ETF Momentum Strategy?” that each month holds SPDR S&P 500 (SPY) or iShares Barclays 20+ Year Treasury Bond (TLT) depending on which has the higher total return over the last three months. Specifically, the three strategies are:

1. Pair Switching (PS) – the original strategy as described above.
2. Quint Switching (QS) – adds iShares MSCI EAFE (EFA), PowerShares QQQ (QQQ) and iShares MSCI Emerging Markets (EEM) to the asset universe, each month picking the top performer.
3. Quint Switching Filtered (QSF) – modifies QS by adding a rule that if any of SPY, TLT, EFA, QQQ and EFA have non-positive returns over the lookback interval, switch to iShares Barclays 7-10 Year Treasury (IEF) . 

For all strategies, he includes 0.1% switching frictions for each buy and sell action. He focuses on compound annual growth rate (CAGR) and maximum drawdown (DDD_max) as key strategy performance metrics. He considers momentum ranking (lookback) intervals of 1 to 5 months to determine the optimal interval for the two strategy extensions. Using monthly dividend-adjusted closes of the specified funds during April 2004 through January 2018, he finds that:

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