Should investors who believe that the U.S. dollar (USD) is doomed by deficits/debt consider a momentum strategy holding the USD hedge that most recently performed best? To investigate, we test a simple momentum strategy (Winner) that each month holds the one of the following three assets with the highest prior-month return:
- Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) - the safest debasement hedge.
- SPDR Gold Shares (GLD) - a conventional debasement hedge.
- Bitcoin USD Price (BTC-USD) - an innovative debasement hedge.
We focus on compound annual growth rate (CAGR) and maximum drawdown (MaxDD) for performance comparison. We use a equal-weighted, monthly rebalanced (EW) portfolio of the three assets as a benchmark. We commence testing in September 2015 to allow momentum measurement (lookback) interval sensitivity analysis. Using monthly total returns for the above three assets during September 2014 (limited by BTC-USD) through December 2025, we find that:
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