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.
Blog Archives
Timing the Stock Market with the Shiller CAPE
- 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 Track for 2.5% Inflation by December 2016; Update November 2016.
- 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.
Posted in blogs
On Track for 2.5% Inflation by December 2016; Update November 2016.
- 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.
Posted in blogs
Market Timing with ETFs SH and RSP: Using the iM-Composite & Standard Market Timers’ Rules
- 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.
Profitable Market Timing Using Performance of the Hi-Beta and Lo-Beta Stocks of the S&P 500
- 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.
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Composite Market Timing Increases Returns And Reduces Drawdown.
- 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.
Profitable Market Timing with the Unemployment Rate, Backtested to 1974.
- 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.
Components for the iM Composite 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:
- Unemployment Rate (UNEMP),
- Performance of the Hi-Beta and Lo-Beta stocks of the S&P 500,
- TED Spread,
- Market Climate Score,
- iM Standard Timer,
- CBOE Volatility Index VIX.
Posted in blogs
2.5% Inflation By December 2016; This Negative Inflation Surprise Favors TIPS Over Conventional Bonds!
- 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
With reference to Section 202(a)(11)(D) of the Investment Advisers Act:
We are Engineers and not Investment Advisers,
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