- An investor who is able to assess stock market climate, and able to adjust asset allocation accordingly, will have an advantage in the market.
- Four different approaches are used to assess market climate which are based on economic, momentum and sentiment indicators. This results in five different market climate segments.
- During up-markets the system is invested in long equity ETFs and then switches progressively to fixed-income ETFs when neutral or negative stock market climates exist.
- This system invests simultaneously in four Vanguard ETFs (or their corresponding mutual funds), appropriately selected for the prevailing market climate, and typically holds them for longer than a year.
- A backtest of the model from Jan-2000 to Aug-2016 shows an average annual return of 15% with a maximum drawdown of -12.6% and a low average annual turnover of 82%.
Blog Archives
Improving on Target Date Funds: 14.5% Return from the iM Best4 MC-Score Vanguard ETF Investor System
ETF Investing According to Market Climate: With the iM Best2 MC-Score System
- This system provides investment selections according to stock market climate. During up-markets it is long equity ETFs and switches to bond- and gold ETFs during neutral and negative markets.
- It invests periodically in only two ETFs, appropriately selected for the prevailing market climate.
- A backtest from Jan-2000 to Jul-2016 shows an average annual return of 16% with a maximum drawdown of -17% and only 61 realized trades during this 16.5 year long period.
Trading the High-Yield, Low-Volatility Stocks of the S&P500 With the iM HiD-LoV-7 System
- The system screens for S&P 500 stocks which yield significantly more than the average yield of the index and which also have a low 3-yr beta (low volatility).
- It is shown that holding continuously all the screen-selected high-yielding, low-volatility stocks of the S&P500 would have provided an average annualized return of about 14% from Jan-2000 to Jun-2016.
- Holding only the highest ranked seven stocks of this group and periodically rebalancing would have produced a higher annualized return of about 22% with a maximum drawdown of -34%.
- The iM HiD-LoV-7 System shows much higher returns and less risk than the S&P 500 Low Volatility High Dividend Index.
Franco-Nevada Better Than Gold: Evaluating Royalty Companies With iMarketSignals’ Fund Rating System
- Royalty companies receive a stream, which is an agreed-upon amount of gold, silver, or other precious metal that a mining company is obligated to deliver in exchange for up-front cash.
- From 2008 to 2016, Franco-Nevada produced the best returns of all royalty companies, and better returns than GLD or SPY.
- When compared to GLD as the benchmark, the iM-Rating for FNV is A(A), indicating that the most recent one- and five-year Rolling Returns for the company were higher than for
- Additionally, the one- and five-year rolling return graphs for FNV are sloping upwards near the end, indicating possible further excess gains over the benchmark ETFs, GLD and SPY.
The Unemployment Rate is Not Signaling a Recession: Update June 3, 2016
A reliable source for recession forecasting is the unemployment rate, which can provide signals for the beginnings and ends of recessions. The unemployment rate model (article link), updated with the May figure of 5%, does not signal a recession now.
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TIAA-CREF Actively Managed Equity Funds Did Not Add Value For Investors!
The iM Fund Rating System rates a fund’s return relative to a benchmark fund by comparing the terminal values from periodic $1.00 monthly contributions to both funds over the same period. Ratings can range from a grossly underperforming ‘E’ to a good outperforming ‘A’. The ratings are derived from the most recent past 1-yr and 5-yr Rolling Performances, shown as ‘1yr(5yr)’ e.g. A((B)).
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The Dynamic Linearly Detrended Enhanced Aggregate Spread: A Long Leading Recession Indicator
- The DAGS, short for Dynamic Linearly Detrended Enhanced Aggregate Spread, is a derivative of the Enhanced Aggregate Spread (EAS) recession indicator which comes from Robert Dieli.
- The DAGS can signal, as much as nine months ahead when a cycle peak (recession start) is likely to take place.
- Armed with that information, investors can make appropriate plans. As of writing (May 2016), it signals, at least to the end of January 2017, a continuation of the expansion phase of this business cycle.
The Dieli Enhanced Aggregate Spread: A Long Leading Recession Indicator
- The Enhanced Aggregate Spread (EAS) comes from Robert Dieli, and most of the following description of this indicator, and why it works, is from personal communications.
- The EAS can signal, as much as nine months ahead, when either a cycle peak (recession start) or a cycle trough (recession end) is likely to take place.
- Armed with that information, decision makers can make appropriate plans. As of this writing (May 2016), it signals that it is highly unlikely for a recession to begin before the end of 2016.
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A 0.3% Rise in the Unemployment Rate Will Signal an Oncoming Recession.
- A reliable source for recession forecasting is the unemployment rate (UER), which can provide signals for the beginnings and ends of recessions.
- Recently Gundlach warned if the UER moves up a couple of tenths in the next couple of months, “we will be on recession watch.”
- The latest UER (March 2016) is at 5.0%, signifying that no recession is imminent. However, should the UER increase to 5.3% then a recession will be signaled.
- Investors should carefully monitor the unemployment rate, because if it moves up a few tenths of a percent from where it is now, then high recession probabilities prevail.
The iM-BestogaX Index of the Russell1000 and related Trading Systems
- The iM-BestogaX Index of the Russell1000 holds the so called “Vice” stocks (excluding Gaming stocks), plus the stocks from the GICS-sub-industries: Restaurants, Soft Drinks, and Internet Retail.
- This capitalization weighted index outperformed SPY by about 4.5-times from Jan-2000 to Mar-2016.
- Over down-market periods the iM-BestogaX Index lost on average 87% less than SPY, and over up-market periods gained on average 24% more than SPY.
- Trading systems which periodically select a small number of highest ranked stocks from the Index produced simulated annualized return as high as 34.4% with maximum drawdowns of about -20%.
With reference to Section 202(a)(11)(D) of the Investment Advisers Act:
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