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Alternative Simplest Asset Class Momentum Strategies

June 21, 2023 • Posted in Strategic Allocation

In response to “Tech Premium Boost for Simplest Asset Class Momentum Strategy?”, a subscriber asked about testing the combination of Vanguard Growth Index Fund (VUG) and Vanguard Total Bond Market Index Fund (BND) in the “Simplest Asset Class ETF Momentum Strategy?”, which 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. To investigate, we run a horse race between the strategy executed with SPY and TLT (SPY-TLT), the strategy executed with Invesco QQQ Trust (QQQ) and TLT (QQQ-TLT) and the requested alternative (VUG-BND). We focus on compound annual growth rates (CAGR) and maximum drawdowns (MaxDD) as performance metrics and assess robustness across lookback intervals of one to 12 months. Using monthly dividend-adjusted prices for SPY, QQQ, VUG, TLT and BND during April 2007 (limited by BND) through May 2023, we find that:


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