• Past research suggests that the relative change in the volume of Google searches for financial terms such as “debt” or “stocks” can be used to anticipate stock market trends.
• In this analysis the search term “debt” was used to obtain monthly search volume data from Google Trends.
• The analysis shows, that a decrease in search volume typically preceded price increases of the S&P 500 index, and vice versa.
• Switching between ETF (SPY) and ETF (IEF) based on monthly search volume data from 2005 to 2018, would have made a profit of 634% versus 220% for buy-and-hold SPY.

• The iM-Country Rotation System periodically selects one country ETF from six countries, USA, Canada, Japan, Australia, Germany and Sweden, based on the performance of their respective currency ETFs.
• Backtests from 2009 to 2018 (the bull market period) show that each foreign country ETF under-performed the US stock market over the full backtest period.
• However, when periodically selecting ETFs using a ranking system based on the performance of the countries’ respective currency ETFs, the model significantly out-performed the US stock market.
• Over the period 3/9/2009-7/21/2018 the system showed a simulated annualized return of 29.4% versus 18.7% for the SPDR S&P 500 ETF Trust (SPY), with similar maximum draw-downs of about -19%.

• From 1950 to 2018 the S&P 500 performed best from November to April, and significantly worse from May to October during most years.
• From 1950-2018 the real annualized return for the S&P 500 was 6.71%. Had one only invested from November to April each year the return would have been 6.60%, almost the same.
• Investing in a money-market fund from May to October each year and the remaining time in the S&P 500 would have provided a higher real annualized return of 7.17%.
• For the 32 year period of rising interest rates (1950-1982) the real return of the S&P 500 was only 5.40%, much less than for following 36 years of falling interest rates.

• This strategy exploits the anomaly that Cyclical Sectors and Small Caps perform best from November to April, and Defensive Sectors do better from May to October during most years.
• In this analysis only one ETF is periodically selected by a simple ranking system from the cyclical and defensive groups, respectively, and held for six months.
• Out of the 37 six-month periods, 36 periods showed gains ranging from 0.1% to 28.1%, while only one six-month period produced a loss of -9.3%.
• For the approximately 18.5 year period from end of Oct-1999 to May-2018 the backtest showed an annualized return of 19.8% with a maximum drawdown of -30%.
• For an “inverted” switching strategy, when cyclicals ETFs are used for the May-October period and defensive ETFs during November-April period, the annualized return was 3.2% and maximum drawdown was -60%.

• Based on its historic trend, the stock market appears to be overvalued.
• The Shiller Cyclically Adjusted Price to Earnings Ratio P/E10 is at high level of 33.5 (and P/E5 of 28.0), and a market correction is possible.
• Similar conditions for the P/E5, and S&P-real’s position relative to the long-time trend, were observed only 3-times in the past: in 1937, 1998 and 2006.
• The historic trend suggests a total probable real loss of about 15% over the next two years.
• Analysts’ long-term forecasts of stock returns made 7 years ago appear to have been unrealistically low.

• The Cyclically Adjusted Price to Earnings Ratio (CAPE ratio) is at 32.1, a very high level which signals overvaluation of stocks and low forward returns, according to Shiller.
• This level was only exceeded twice in the last 136 years, in Sep-1929 and from Jul-1997 to Jul-2001, with market declines of 77% and 45% then recorded.
• The Moving Average CAPE Ratio Methodology used here references stock market valuation to a 35-year moving average of the Shiller CAPE ratio instead of the 1881-2017 long-term average.
• Based on the 35-year moving average methodology, historic market performance points towards continuing up-market conditions, possibly for a number of years.
• To avoid the bear market, exit stocks when the spread between the 5-month and 25-month moving averages of S&P-real becomes negative and simultaneously the CAPE-Cycle-ID score is 0 or -2.

• The founder of Vanguard, Jack Bogle, says that over the next decade a conservative portfolio of bonds will only return about 3% a year and stocks about 4% a year.
• However, returns can be improved with a dynamic asset-allocation strategy that adjusts stock- and bond-fund holdings in a retirement account according to market climate.
• The Vanguard LifeStrategy Moderate Growth Fund (VSMGX) holds static investments of 60% equity and 40% bond funds and is compared to our dynamic strategy model.
• Our iM-DMAC(60:40) model, designed for retirement saving and withdrawal management, holds identical assets as VSMGX in up-market conditions but switches to 100% bond funds during equity down-market periods.
• The result, the iM-DMAC(60:40) vastly outperforms VSMGX.

• The Cyclically Adjusted Price to Earnings Ratio (CAPE ratio) is at 30.2, a very high level which signals overvaluation of stocks and low forward returns, according to Shiller.
• This level was only exceeded twice in the last 136 years, from Aug-1929 to Sep-1929 and from Jun-1997 to Jan-2002, with market declines of 77% and 45% then recorded.
• The Moving Average CAPE Ratio Methodology used here references stock market valuation to a 35-year moving average of the Shiller CAPE ratio instead of the 1881-2017 long-term average.  
• Based on the 35-year moving average methodology, historic market performance points towards continuing up-market conditions, possibly for a number of years.
• To avoid the bear market, exit stocks when the spread between the 5-month and 25-month moving averages of S&P-real becomes negative and simultaneously the CAPE-Cycle-ID score is 0 or -2.

Shiller warns in his recent commentary The Coming Bear Market? :
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