"Using AI Panel to Screen Investment Strategies" reports AI Panel responses to the following prompt:
Please concisely describe and quantify the one most promising tactical asset class allocation/tilt strategy for an individual U.S. investor with typical risk aversion who is accumulating wealth for retirement in a tax-deferred account. Focus on exceptional simplicity, high liquidity, high net compound annual growth rate [CAGR] and shallow maximum peak-to-trough drawdown [MaxDD] as essential criteria.
Two of the AIs select dual momentum strategies based on exchange-traded funds (ETF). Both switch between U.S. stocks (e.g., SPY) and international stocks (e.g., EFA) according to which has the higher return over the prior 12 months. One (Dual 1) moves to bonds (e.g., IEF) if the winner does not beat short-term U.S. Treasury bills (T-bills) over the last 12 months. The other (Dual 2) moves to T-bills if the winner is below its 10-month simple moving average (SMA10). Using monthly total returns for the selected ETFs and T-bills to validate performances of these two strategies during July 2002 (limited by IEF) through September 2026, we find that:
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