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• This system always holds five ETFs (equity-, fixed income-, leveraged equity-, short equity-, and Gold-ETFs) selected according to stock market climate and rank.
• Typically, during good-equity markets it holds equity-ETFs and/or leveraged-equity ETFs, and during bad-markets fixed income-ETFs and/or short equity-ETFs. Also at times it can hold three gold-ETFs with other ETFs.
• A one factor ranking system selects five ETFs from a preselected list of 33 ETFs. A simulation from 2000 to 2017 shows a 35% annualized return with a maximum drawdown of -13%.

In our continued effort to satisfy request for low drawdowns models with reasonable turnover and good returns we provide this model, which combines:

• the iM-Composite Timer (SPY-IEF),
• the iM-Composite Timer(GLD&SCHP+VTV&VOE+BIV&LQD) based on the iM-Composite (Gold-Stocks-Bond) Timer,
• the iM-Composite-(SH-RSP) Timer,
• the iM-Best7(HiD-LoV).
• This combination model always holds four ETFs approximately equal weight at any time and seven S&P 500 stocks.

The combo showed a simulated 22.2% annualized return with a maximum drawdown of -7.7% when backtested from Jan-2000 to Apr-2017.

In an effort to satisfy request for low turnover models with low drawdowns and reasonable returns we provide this model, which combines:

• the iM-Comp Mkt Timer Stocks/Bonds (VOE-BIV) based on the iM-Composite Timer (SPY-IEF) which holds only one ETF at any time (33% weight in the combo),
• and the iM-Composite Mkt Timer(GLD&SCHP+VTV&VOE+BIV&LQD) based on the iM-Composite (Gold-Stocks-Bond) Timer which holds two ETFs concurrently (67% weight in the combo).
• This combination model always holds two or three ETFs at any time for a minimum period of six weeks before any of them can be sold.

The combo showed a 17.6% annualized return with a maximum drawdown of -11.2% when backtested from Jan-2000 to Mar-2017 on the simulation platform Portfolio 123.

• The system screens for high dividend, low volatility S&P 500 stocks yielding significantly more than the average yield of the index and which also have a low 3-yr beta.
• Market timing rules related to our long-period backtest models, the MAC-US Timer, CAPE-Cycle-ID, and Inflation Timer have been incorporated into the model’s algorithm, and turnover has been modestly increased by introducing an additional sell signal based on volatility.
• The 16.5 year backtest of the original iM HiD-LoV-7 System produced annualized return of about 22% with a maximum drawdown of -34%, whereas the improved model provided annualized return of about 25% with a maximum drawdown of -14% over the same backtest period. (Figure-3a)

• Stocks usually perform poorly when inflation is on the rise. Using the inflation rate, we developed a market timer according to two simple rules.
• Switching according to the Timer signals between the S&P500 with dividends and a money-market fund would have provided from Aug-1953 to end of Jan-2016 and annualized return of 12.69%.
• Over the same period buy-and-hold of the S&P500 with dividends showed an annualized return of 10.08%, producing about a quarter of the total return of the Timer model.

• Switching between stocks and bonds as signaled by a simple moving average crossover system of the S&P 500 – the MAC-US Timer – produces significantly higher returns than buy-and-hold stocks.
• The model has been updated from Aug-1965 to Jan-2017, conservatively assuming that funds are placed in the money market when not in the stock market.

• Stocks usually perform poorly when inflation is on the rise. Using the inflation rate, we developed a market timer according to two simple rules.
• Switching according to the Timer signals between the S&P500 with dividends and a money-market fund would have provided from Aug-1953 to end of Jan-2016 and annualized return of 12.48%.
• Over the same period buy-and-hold of the S&P500 with dividends showed an annualized return of 10.08%, producing about a quarter of the total return of the Timer model.

• This model uses the rules of the iM-Gold Timer and the iM-Composite Market Timer to signal periodic investments in gold, stocks and bonds.
• From Jan-2000 to Jan-2017 the Gold Timer signaled eight gold investment periods totaling only 9.3 years, while for the remaining periods totaling 7.7 years the model would have been in cash.
• During the “cash periods” the Composite Market Timer provides the signals when to invest in stock and/or bond ETFs. Bond ETFs include the ETF (XLU) are also selected according to the prevailing Market Climate Score (MC-Score) and a ranking system.

On January 20, 2017, our long leading recession indicator DAGS signaled an oncoming recession.

Based on past history a recession could start at the earliest in 6 months (July-2017), but not later than 28 months from now (May-2019). The average lead time to previous recessions provided by DAGS would have been 15 months.

• Shiller’s Cyclically Adjusted Price to Earnings Ratio (CAPE ratio) is at 27.8, which is 11.1 above its long-term mean of 16.7, signifying overvaluation of stocks and low forward returns.
• The alternative CAPE ratio methodology offered in this article references stock market valuation to a 35-year moving-average of the Shiller CAPE ratio instead of to the 1881-2016 fixed long-term mean.
• The latest CAPE ratio predicts a 10-year annualized real return of only 1.5%, whereas the presented methodology forecasts 5.8%, similar to the long-term market trend expected real return of 5.4%.

We have revised the iM Gold-Timer. The timer endeavors to signal long-term investment periods for Gold. It uses the SPDR® Gold Shares ETF: GLD. When not invested in GLD the model goes to 100% cash.

• The Shiller CAPE (cyclically adjusted price-earnings ratio) is typically regarded as a stock market valuation measure. When the CAPE is high stocks are supposed to be expensive, and vice-versa.
• The CAPE itself is not a good stock market timer. However, the CAPE can indirectly be used for market timing by determining a Cycle-ID as formulated by Theodore Wong.
• Our 1950-2016 backtest of the CAPE-Cycle-ID model, when switching between the S&P500 with dividends and the money market, showed an annualized return of 11.9%, versus 10.4% for buy-and-hold.

• On September 19, we estimated an inflation rate of 2.5% for December 2016, and 1.4% for September 2016.
• Actual September inflation came in at 1.5%, the December inflation estimate remains at 2.5%.
• With inflation rising, and markets uncertain, Treasury Inflation Protected funds (TIPS) should remain a reasonably safe investment. Conventional bond funds are expected to perform worse than TIPS funds.

• On September 19, we estimated an inflation rate of 2.5% for December 2016, and 1.4% for September 2016.
• Actual September inflation came in at 1.5%, the December inflation estimate remains at 2.5%.
• With inflation rising, and markets uncertain, Treasury Inflation Protected funds (TIPS) should remain a reasonably safe investment. Conventional bond funds are expected to perform worse than TIPS funds.

• This market timing model integrates the iM-Standard Market Timer and the iM-Composite Market Timer.
• This model switches between ETFs SH and RSP providing signals when to be short or long the stock market.
• The model does not utilize Bond ETFs, and is therefore not directly affected by the potential risk of rising interest rates.
• From 2001 to 2016 switching between SH and RSP provided significant benefits. This strategy would have produced an average annual return of 26.2% versus only 8.5% for buy&hold RSP.

• This market timing model compares the performance of two different types of stock groups over time and provides signals when to invest or not to invest in the stock market.
• When the performance of the Hi-Beta stocks becomes lower than, or equal to Lo-Beta stocks the model exits the stock market and enters the bond market.
• It re-enters the market when the performance of the Hi-Beta stocks becomes higher than Lo-Beta stocks.
• From 2001 to 2016 switching between bonds and stocks provided significant benefits. This strategy would have produced an average annual return of 12.5% versus only 5.2% for buy&hold stocks.

• Reliance on a single market timer could be risky. The risk can be reduced with a composite timer who’s component timers use different, uncorrelated, financial and economic data.
• From 2001 to 2016 switching between bonds and stocks using a composite timer would have produced an average annual return of 19.7% versus only 5.2% for buy & hold stocks.

• If the unemployment rate is higher than three months ago the model exits the stock market and enters the bond market, and re-enters the market when the unemployment rate is equal or lower than where it was three months ago.
• From 2001 to 2016 switching between bonds and stocks provided significant benefits. This strategy would have produced an average annual return of 13.0% versus only 5.2% for buy&hold stocks.
• Using long-term data from 1973 to 2016 for stocks and bonds confirms the unemployment rate (UNEMP) as a profitable stock market timer.

Instead of relying on just one market timer, many uncorrelated market timing strategies can be designed from the comprehensive and diverse financial data that is readily available, and then combining them in a robust composite market timing model. We designed six such component timers using following:

1. Unemployment Rate (UNEMP),
2. Performance of the Hi-Beta and Lo-Beta stocks of the S&P 500,
3. TED Spread,
4. Market Climate Score,
5. iM Standard Timer,
6. CBOE Volatility Index VIX.

• If the FED does not change the Federal Funds Rate then the year-on-year inflation rate is set to rise, and we calculate it at 2.5% for December 2016.
• The inflation rate for August was 1.1% and it is predicted rise to 2.5% by December. Accordingly, prices of Treasury Inflation-Protected Securities (TIPS) should rise as well.
• With inflation rising, and markets uncertain, TIPS should be a reasonably safe investment for some time. Conventional bond funds are expected to perform worse than TIPS funds