Blog

• The S&P 500 averaged 6,736 for October 2025, 2,604 points above its long-term trend of 4,132, implying a 39% decline to reach the trend and signifying a valuation substantially above historic norm.
• The long-term trend indicates a forward 10-year annualized real return of only 1.4%, while the CAPE-MA35 methodology derived 10-year annualized real return is also modest at about 4.3%, indicating limited long-term upside.
• The short-term outlook indicated by CAPE-MA35 Neutral phase has historically yielded low short-term returns.

• This is a dynamic ETF allocation strategy using the CAPE-MA35 ratio—the Shiller CAPE divided by its 35-year moving average—to identify market phases and adjust portfolio exposure.
• The model defines four primary phases with respective ETFs—Growth (QQQ), Defensive (GLD, XLU), Uptrend (QQQ, XLE), and Downtrend (GLD)—based on the trend and relative valuation of CAPE-MA35. ETF allocations are adjusted monthly in response to these phases.
• Backtesting from 1999 to 2025 shows the model outperforms SPY with 20.1% annualized returns, lower drawdowns, and consistent long-term performance with low turnover.
• The strategy offers a practical, rules-based approach to market timing, blending long-term valuation with trend analysis for superior risk-adjusted returns.

• This study presents a rules-based ETF allocation model that uses the CAPE-MA35 ratio—the Shiller CAPE divided by its 35-year moving average—to identify distinct market phases and dynamically adjust portfolio exposure.
• The model defines four primary phases—Growth, Defensive, Uptrend, and Downtrend—based on the trend and relative valuation of CAPE-MA35. ETF allocations are adjusted monthly in response to these phases.

• The average of S&P 500 for March 2025 was 5,680, declining to 5,074 by April 4, 2025 (now 13% up from Jul-2023 average of 4,497 when forward returns for stocks “looked reasonably good” according to this analysis).
• The S&P 500 is still 1,140 points higher than the corresponding long-term trend value of 3,934 for April 2025.
• For the S&P 500 to reach the corresponding long-trend value would entail a 22% decline from the April 4, 2025 value, indicating that the S&P 500 is still considerably overvalued.
• Assuming that the current S&P 500 value remains unchanged until the end of April, then the CAPE-ratio would be 31.0, 15% higher than its 35-year moving average (MA35), currently at 26.9.
• The long-term trend indicates a forward 10-year annualized real return of 4.0%, while the CAPE-MA35 methodology derived 10-year annualized real return is better at about 6.7%.

• The average of S&P 500 for Mar-2025 was 5,680, (26% up from Jul-2023 average of 4,497 when forward returns for stocks “looked reasonably good” according to this analysis).
• The S&P 500 is now 1,760 points higher than the corresponding long-term trend value of 3,920.
• For the S&P 500 to reach the corresponding long-trend value would entail a 31% decline from the March average value, indicating that the S&P 500 is considerably overvalued.
• The Shiller CAPE-ratio is at 34.9, 30% higher than its 35-year moving average (MA35), currently at 26.9, forecasting a 10-year annualized real return of about 5.5% derived from the CAPE-MA35 methodology.
• The long-term trend indicates a forward 10-year annualized real return of only 2.7%

• The iM Seasonal Multi-Sector Investment Strategy capitalizes on a seasonality-based approach to investing, leveraging the well-known “Sell in May and Go Away” phenomenon.
• During the winter period (end of October to the end of April) the model invests in the five highest-ranked U.S. Sector ETFs equally weighted.
• Selection is based on the performance of 30 sector ETFs during the previous one- and two-year winter periods, and not by selecting arbitrarily cyclical- and defensive categories for the winter- and summer periods.
• In the summer period the model allocates funds equally between the iShares 20+ Year Treasury Bond ETF (TLT) and Invesco QQQ.
• By combining sector rotation and hedging mechanisms for inflationary periods, this strategy offers a systematic framework for maximizing returns and managing risks.

• The average of S&P 500 for Dec-2024 was 6,011, (34% up from Jul-2023 average of 4,497 when forward returns for stocks “looked reasonably good” according to this analysis).
• The S&P 500 is now 2,135 points higher than the corresponding long-term trend value of 3,876.
• For the S&P 500 to reach the corresponding long-trend value would entail a 35% decline from the December average value, indicating that the S&P 500 is considerably overvalued.
• The Shiller CAPE-ratio is at 37.9, 42% higher than its 35-year moving average (MA35), currently at 26.7, forecasting a 10-year annualized real return of about 4.6% derived from the CAPE-MA35 methodology.
• The long-term trend indicates a forward 10-year annualized real return of only 2.0%

• A reliable source for recession forecasting is the unemployment rate (UER), which can provide signals for the beginnings and ends of recessions.
• The model was published in 2012 and has correctly signaled the 2020 recession.
• The latest UER (August 2023) is 3.8%, signifying no recession. However, if the September UER is 4% or higher a recession will be signaled according to the model.

• The average of S&P 500 for July-2023 was 4,497 (4% down from Dec-2021 high average of 4,675) and is 859 points higher than the corresponding long-term trend value of 3,638.
• For the S&P 500 to reach the corresponding long-trend value would entail a 20% decline from the July average value, indicating that the S&P 500 is moderately overvalued.
• The Shiller CAPE-ratio is at 30.9, 19% higher than its 35-year moving average (MA35), currently at 26.1, forecasting a 10-year annualized real return of about 6.5%.
• The long-term trend indicates a forward 10-year annualized real return of 4.4%

• Knowing when the U.S. economy is heading for recession is paramount to successful investment decisions.
• Our weekly Business Cycle Index would have provided early reliable warnings for the past seven recessions and signaled the Covid 2020 recession one week late.
• The BCIg has signaled a recession warning mid March 2023, but BCIg recovered and is no longer signalling a recession.
• However the BCIw, also on recovery path, continues to signal a recession which now is estimated to begin in 9 to 22 weeks.
• It is too early to say if a recession has been averted, more likely is it is delayed towards the end the end of 2023 or begin 2024.

(click to enlarge)

• This ETF trading model uses the Conference Board Leading Economic Index to determine “Risk-On” periods for equities.
• A universe is defined from the SPDR, Vanguard, and PowerShares ETF providers for the sectors healthcare, energy, communication, technology, and general multi-sector funds, holding large-mega cap stocks from the United States.
• The model selects 3 ETFs from the previously defined universe at the beginning of a “Risk-On” period and holds these ETFs continuously until the end of the “Risk-On” period.
• During “Risk-Off” periods for equities it goes to the gold ETF (GLD) to maximize returns. ETF (BND) is also a suitable alternative to GLD.
• The simulation shows that this strategy would have produced over 7-times the total return of SPY with similar risk.

• The average of S&P 500 for March-2023 was 3,969 (15% down from Dec-2021 average of 4,675) and is 384 points higher than the corresponding re-calibrated long-term trend value of 3,585.
• For the S&P 500 to reach the corresponding long-trend value would entail a 10% decline from the March average value, indicating that the S&P 500 is not significantly overvalued anymore.
• The Shiller CAPE-ratio is at 27.9, 8% higher than its 35-year moving average (MA35), currently at 25.9, forecasting a relatively high 10-year annualized real return of about 7.3%.
• The long-term trend indicates a forward 10-year annualized real return of 5.5%
• However, rising inflation with a falling CAPE-MA35 ratio, similar to what occurred in the period 1964-1973, implies very low or negative 10-year forward annualized real returns.

• Knowing when the U.S. economy is heading for recession is paramount to successful investment decisions.
• Our weekly Business Cycle Index would have provided early reliable warnings for the past seven recessions and signaled the Covid 2020 recession one week late.
• The Department of Labor backward revised nearly two years of seasonal adjusted data.
• The BCIg is now signalling a recession since mid March 2023 with a 12 weeks average lead time.
• The BCIw is now signalling a recession, earliest in 5 weeks but not later than 17 weeks.

(click to enlarge)

• The average of S&P 500 for Nov-2022 was 3,917 (16% down from Dec-2021 average of 4,675) and is 385 points higher than the corresponding re-calibrated long-term trend value of 3,532.
• For the S&P 500 to reach the corresponding long-trend value would entail a 10% decline from the November average value, indicating that the S&P 500 is not significantly overvalued anymore.
• The Shiller CAPE-ratio is at 28.3, 10% higher than its 35-year moving average (MA35), currently at 25.8, forecasting a relatively high 10-year annualized real return of about 7.2%.
• The long-term trend indicates a forward 10-year annualized real return of 5.5%
• However, rising inflation with a falling CAPE-MA35 ratio, similar to what occurred in the period 1964-1973, implies very low or negative 10-year forward annualized real returns.

• The best fit line and prediction band were re-calculated from Jan-1871 to Sep-2022. This added over 10 years of data after July-2012, the end date of the previous regression analysis.
• The average of S&P 500 for Oct-2022 was 3,726 (20% down from Dec-2021 average of 4,675) and is 207 points higher than the corresponding re-calibrated long-term trend value of 3,519.
• For the S&P 500 to reach the long-trend would entail only a 6% decline from the October average value, indicating that the S&P 500 is not significantly overvalued anymore.
• The Shiller CAPE-ratio is at 27.2, only 6% higher than its 35-year moving average (MA35), currently at 25.7, forecasting a relatively high 10-year annualized real return of about 7.5%.
• However, rising inflation with a falling CAPE-MA35 ratio, similar to what occurred in the period 1964-1973, implies very low or negative 10-year forward annualized real returns.

• The average of S&P 500 for September 2022 was 3,853 (18% down from December 2021 average of 4,675) and is still 1,243 points higher than the corresponding long-term trend value of 2,610.
• For the S&P 500 to reach the long-trend would entail a 32% decline from the September average value, possibly over a short period.
• The Shiller CAPE-ratio is at a level of 28.4. That is 10% higher than its 35-year moving average (MA35), currently at 25.7.
• The CAPE-MA35 ratio is at 1.10 (down from the December 2021 level of 1.51), forecasting a relatively high 10-year annualized real return of about 7.1%.
• However, rising inflation with a falling CAPE-MA35 ratio, similar to what occurred in the period 1964-1973, implies very low or negative 10-year forward annualized real returns.
• The historic long-term trend indicates a September 2032 value of 4,943; a 10-year forward real annualized return of only 2.5% (up from the December 2021 forecast of 0.2%).

• Prior to recession the yield curve becomes inverted, as indicated by the Forward Rate Ratio between the 2-year and 10-year U.S. Treasury yields (FRR2-10) being less than 1.00.
• The FRR2-10 crosses 1.000  downward signifying that US economic activity is in the boom phase of the business cycle, nearing the next recession.
• The average lead time after FRR2-10 becomes less than 1.00 to the subsequent recession start was 14 months for the seven of the eight last recessions.

• The average of S&P 500 for May 2022 was 4,040 (14% down from December 2021 average) and is still 1,469 points higher than the corresponding long-term trend value of 2,571.
• For the S&P 500 to reach the long-trend would entail a 36% decline from the May average value, possibly over a short period.
• The Shiller CAPE-ratio is at a level of 31.0. That is 21% higher than its 35-year moving average (MA35), currently at 25.6.
• The CAPE-MA35 ratio is at 1.21 (down from the December 2021 level of 1.51), forecasting a 10-year annualized real return of about 6.3%.
• However, rising inflation with a falling CAPE-MA35 ratio, similar to what occurred in the period 1964-1973, implies very low or negative 10-year forward annualized real returns.
• The historic long-term trend indicates a 10-year forward real annualized return of only 1.9% (up from the December 2021 forecast of 0.2%).

• The average of S&P 500 for May 2022 was 4,040 (14% down from December 2021 average) and is still 1,469 points higher than the corresponding long-term trend value of 2,571.
• For the S&P 500 to reach the long-trend would entail a 36% decline from the May average value, possibly over a short period.
• The Shiller CAPE-ratio is at a level of 31.0. That is 21% higher than its 35-year moving average (MA35), currently at 25.6.
• The CAPE-MA35 ratio is at 1.21 (down from the December 2021 level of 1.51), forecasting a 10-year annualized real return of about 6.3%.
• However, rising inflation with a falling CAPE-MA35 ratio, similar to what occurred in the period 1964-1973, implies very low or negative 10-year forward annualized real returns.
• The historic long-term trend indicates a 10-year forward real annualized return of only 1.9% (up from the December 2021 forecast of 0.2%).

• Investment risk can be reduced by a multi-model market timer whose many components use different and uncorrelated financial and economic data, including inflation.
• This model seeks to determine effective asset allocation for risk-on and risk-off periods for equities considering the effect of inflation.
• Four risk scenarios are possible: risk-on & normal-inflation, risk-on & high-inflation, risk-off & normal-inflation, and risk-off & high-inflation. Different ETF groups apply to each risk scenario.
• From 2000 to 2022, switching accordingly between risk-related ETF groups would have produced an annualized return of about 39% versus 6.5% for buy and hold SPY.