Evidence-based investing research
Login Join
Value Investing Strategy (Strategy Overview)
Allocations for November 2026 (Final)
Cash TLT LQD SPY
Momentum Investing Strategy (Strategy Overview)
Allocations for November 2026 (Final)
1st ETF 2nd ETF 3rd ETF

Why Did SACEVS Allocations Just Change So Much?

Steve LeCompte | | Posted in: Strategic Allocation

Guide Asset Allocation and Portfolios Rebalancing and diversification

Key Insight

SACEVS (monthly value-premium allocation across SPY/TLT/LQD/cash) shifted to 100% Cash at end of June 2023, as term, credit and equity premiums sat 2.69, 0.53 and 0.12 standard deviations below inception-to-date averages (Mar 1989–Jun 2023; descriptive).

Subscribers asked why the Simple Asset Class ETF Value Strategy (SACEVS) signaled an apparently dramatic change in allocations at the end of June. SACEVS seeks a monthly tactical edge from timing three risk premiums associated with U.S. Treasury notes, corporate bonds and stocks:

  1. Term - monthly difference between the 10-year Constant Maturity U.S. Treasury note (T-note) yield and the 3-month Constant Maturity U.S. Treasury bill (T-bill) yield.
  2. Credit - monthly difference between the  Moody's Seasoned Baa Corporate Bonds yield and the T-note yield.
  3. Equity - monthly difference between S&P 500 operating earnings yield and the T-note yield.

At the end of each month, the Best Value version of SACEVS picks the most undervalued premium (if any). The Weighted version of SACEVS weights all undervalued premiums (if any) according to degree of undervaluation. Using monthly SACEVS inputs during March 1989 through June 2023, we find that:

Subscribe to Keep Reading

Get the research edge serious investors rely on.

  • 1,200+ research articles
  • Monthly strategy signals
  • 20+ years of backtested analysis
$17.99 /month

Cancel anytime

Subscribe Now

Asset Allocation and Portfolios guide

More on rebalancing and diversification

All 247 articles in the Asset Allocation and Portfolios guide

Further Reading

Momentum Investing, Strategic Allocation Making SACEMS with Variable Lookback Interval the Tracked Baseline Having iteratively compared the Simple Asset Class ETF Momentum Strategy (SACEMS) with a fixed lookback interval to SACEMS... Calendar Effects Asset Class ETF Seasonalities? Average monthly returns for nine asset class ETFs (SPY, IWM, EFA, EEM, TLT, LQD, VNQ, GLD, DBC) are... Strategic Allocation, Volatility Effects SACEMS with Inverse VIX-based Lookback Intervals Update Inverse-VIX variable lookback (1-12 months) for SACEMS (monthly momentum rotation across asset-class ETFs) gives mixed results for Top... Equity Premium U.S. Equity Premium? SPY-minus-EFA relative returns were mostly negative until the 2008-2009 crisis and mostly positive afterward, and SPY is ahead... Momentum Investing, Strategic Allocation SACEVS and SACEMS Strategy Momentum? SACEVS-SACEMS Momentum (monthly pick of SACEVS Best Value or SACEMS EW Top 3 by 1–12 month lookback return)... Bonds, Equity Premium, Strategic Allocation Update SACEVS with End-of-quarter Instead of Quarterly Average Yields? SACEVS:EOQ (end-of-quarter yields) shows mixed results versus original SACEVS (quarterly averages), with EOQ-1 slightly outperforming Best Value but...