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On Track for 2.5% Inflation by December 2016; Update November 2016.

Posted on Oct 20, 2016 by Anton Vrba — No Comments ↓

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.

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Market Timing with ETFs SH and RSP: Using the iM-Composite & Standard Market Timers’ Rules

Posted on Oct 18, 2016 by Georg Vrba — 41 Comments ↓

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.

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Profitable Market Timing Using Performance of the Hi-Beta and Lo-Beta Stocks of the S&P 500

Posted on Oct 4, 2016 by Georg Vrba — 8 Comments ↓

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.

Posted on Sep 30, 2016 by Georg Vrba — 115 Comments ↓

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.

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Profitable Market Timing with the Unemployment Rate, Backtested to 1974.

Posted on Sep 29, 2016 by Georg Vrba — 8 Comments ↓

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.

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Components for the iM Composite Timer

Posted on Sep 28, 2016 by Georg Vrba — 11 Comments ↓

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.

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2.5% Inflation By December 2016; This Negative Inflation Surprise Favors TIPS Over Conventional Bonds!

Posted on Sep 18, 2016 by Anton Vrba — 1 Comment ↓

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

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Improving on Target Date Funds: 14.5% Return from the iM Best4 MC-Score Vanguard ETF Investor System

Posted on Sep 1, 2016 by Georg Vrba — 9 Comments ↓

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%.

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ETF Investing According to Market Climate: With the iM Best2 MC-Score System

Posted on Aug 2, 2016 by Georg Vrba — 23 Comments ↓

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.

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Trading the High-Yield, Low-Volatility Stocks of the S&P500 With the iM HiD-LoV-7 System

Posted on Jun 30, 2016 by Georg Vrba — 40 Comments ↓

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.

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