• The accepted thinking is that the additional risk inherent in stocks is reflected by a “Risk Premium”, being the difference of S&P expected earnings yield and the 10-year note yield.
• An alternative measure of risk is the Cyclically Adjusted Risk Premium (CARP), defined as the inverse of the Shiller CAPE Ratio (CAPE) in percent minus the 10-year note yield.
• The value of the CARP and directional trend of the CAPE can be used to profitably time investments in risk-off and risk-on assets and avoid major stock market losses.
• Prior to the Financial Crisis of 2007-2008 the CARP indicated a “risk-off” asset allocation, in contrast to the S&P Risk Premium which signaled that stocks were undervalued.
• More recently, at end of February 2021, the CARP has signaled the end of embracing risk-on assets and a switch to risk-off assets.

The S&P Risk Premium and below statement comes from Portfolio 123:
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• This Combination Timer seeks to find optimum investment periods for equities. It uses five market timing algorithms, previously described, to periodically invest in three ETFs from a possible 16 available.
• It can hold equity, gold, and fixed income ETFs depending on stock market direction as indicated by a combination of market timers.
• A backtest from January 2000 to July 2021 shows an annualized return of 24.5% with a maximum drawdown of -23% and low annual turnover of 140%.

• The average of S&P 500 for April 2021 was 4141. This is 1701 points higher than the long-term trend value of 2440.
• The current percentage difference of S&P 500 level relative to the current long-term trend level is 70%, a value never exceeded in the recent past since August 2001.
• The Shiller Cyclically Adjusted Price to Earnings Ratio (CAPE) is at a level of 37.0. That is 49% higher than its 35-year moving average (MA35), currently at 24.9.
• The CAPE-MA35 ratio is 1.49, forecasting a 10-year annualized real return of about 4.0%. Should the CAPE-MA35 ratio increase further, then 10-year forward returns will be even lower.

• The Covid triggered recession probably ended in October 2020 according to two reliable recession indicator models.
• Analyzing the series data of both the Conference Board’s Leading Economic Index and the American Chemistry Council’s Chemical Activity Barometer results this conclusion.
• The National Bureau of Economic Research Business Cycle Dating Committee has yet to announce the end of the recession.

The start of the 2020 recession was reported on March 22, 2020 when we announced that the anticipated March 2020 Unemployment Rate would signal the start of a recession.
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• This investment strategy holds a maximum of 50 consensus stock picks from 40 hedge funds with more than $3,500 million Assets Under Management.
• Changes in the holdings occur only every three months when the end of the quarter 13F filings becomes public information; the latest date was February 15, 2021.
• From 02/24/08 – 02/19/21 this strategy would have produced an annualized return (CAGR) of 18.7%, significantly more than the 10.7% CAGR of the S&P 500 ETF (SPY).
• Here we report the most recent holdings, and also list the stocks removed and added as of the week ending 2/19/2021.

• The ModSum/YieldCurve Timer seeks to find optimum investment periods for equities. It uses two market timing algorithms: The ModSum Timer (weighted sum of five market timers), and the YieldCurve Timer.
• The ModSum Timer switches between SPY and IEF, and the YieldCurve Timer adds a hedge with GLD.
• For the period 1/02/2000 to 1/27/20121 this strategy would have produced an annualized return of 22.4% with a maximum drawdown of -14.3%.

• The average of S&P 500 for December 2020 is 3695. This is 1293 points higher than the long-term trend value of 2402.
• The current percentage difference of S&P 500 level relative to the current long-term trend level is 54%, a value never exceeded in the recent past since 2002.
• The Shiller Cyclically Adjusted Price to Earnings Ratio (CAPE) is at a level of 33.7. That is 37% higher than its 35-year moving average (MA35), currently at 24.7.
• The CAPE-MA35 ratio is 1.37, forecasting a 10-year annualized real return of about 5.0%. Should the CAPE-MA35 ratio increase further, then 10-year forward returns will be even lower.
• The long-term trend is forecasting a 10-year annualized real return of 2.1%. The most likely forecast 10-year forward return would be about 3.5%, the average of 5.0% and 2.1%.

• The Yield Curve / Federal Funds Rate Timer signals the switches from stocks to gold and vice versa near or during recession periods.
• Only three parameters are needed; the Effective Federal Funds Rate and the 2-year and 10-year U.S. Treasury yields to determine the periods when the yield curve is inverted.
• The timing rules are based on the state of yield curve and on the trend of the Effective Federal Funds Rate.

This timer signals switches from stocks (S&P500 Total Return) to gold and vice versa near or during recession periods.
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• This strategy exploits the anomaly that equities perform best from November to April, and less so from May to October during most years.
• ETFs (XLV, XLI, XLY, XLB) have historically performed best from November to April, and ETFs (XLK, XLP, XLU, QQQ) have done better than the first group from May to October.
• The super-sector models termed “aggressive” and “defensive” combine, respectively, the Top5(Sector)Select models for ETFs (XLV, XLI, XLY, XLB) and ETFs (XLK, XLP, XLU, QQQ), all previously published on Seeking Alpha.
• This strategy invests alternatingly in the aggressive- and defensive super-sector models during their respective “good” 6-month periods.
• From Jan-2000 to Nov-2020 a backtest shows that this strategy would have outperformed the SPDR S&P 500 ETF Trust (SPY), producing an annualized return of 23.3% versus 6.1% for SPY.
• NOTE: Elsewhere we refer to the “aggressive” season as the winter season, and conversely the “defensive” as the summer season. This model switches all holdings bi-annually end of April and end of October.