- This model invests periodically in eight highly liquid large-cap stocks selected from those considered to be minimum volatility stocks of S&P 500 Index.
- Most stock positions are held for longer than one year resulting in a Tax Efficiency ratio of 81.4%.
- When adverse stock market conditions exist the model shorts the 3x leveraged Ultrapro S&P500 ETF (UPRO) – hedge/current holding ratio= 45%.
- It produced a simulated average annual return of about 36% from Jan-2000 to end of June-2015.
Blog Archives
Best8(S&P500 Min-Volatility)-Tax Efficient Large-Cap Portfolio Management System With Minimum Volatility Stocks of the S&P 500
Minimum Volatility Stocks: 1 year Out-Of-Sample Performance of iM’s Best12(USMV) Models
- Portfolios of the 12 top ranked stocks of the iShares MSCI USA Minimum Volatility ETF provided much higher 1-year returns than the ETF.
- For the period 6/30/14 to 6/18/15, our Best12(USMV)Q3-Investor, a 1-year buy&hold portfolio, returned 26.0%,
- The Best12(USMV)-Trader, re-balanced every 2 weeks, returned 29.3%,
- iShares MSCI USA Minimum Volatility ETF USMV returned 13.3% for the same period..
The Forward Rate Ratio: Predictor Of An Ongoing Stock Bull- And Bond Bear-Market
- 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 has recently peaked at about 1.20 signifying that US economic activity is in the expansion phase of the business cycle, far away from the next recession, with ongoing gains for the stock market predicted.
- Typically after peaks of FRR2-10 the yield of 10-year Treasuries rises, signaling a bond bear-market.
- When FRR2-10 falls to near 1.00 the transition from expansion to boom occurs. The average lead time after FRR2-10 becomes less than 1.00 to the subsequent recession start was 14 months for the last seven recession.
There is no reason why the Fed should increase the Federal Funds Rate any time soon – Update April 2015
- The Trade Weighted US Dollar Index has been growing since Q4 2011. Its growth increasing over the last nine months.
- The annual rise in CPI is below 2%, and the US economy remains relatively weak.
- The US Market is attracting foreign capital that is fleeing their local currency devaluation.
- There is no reason for the Fed to increase interest rates under these conditions.
- Interest rates will probably rise only once the dollar reverses its gains.
Timing the TIAA Real Estate Account
- In order to maximize returns one has to know when to enter and exit the TIAA Real Estate Account.
- Our analysis shows that a firm sell signal arises when its 1-year rolling return moves below 0%.
- A subsequent buy signal would be given when its 1-year rolling return moves from below to above 0%.
Vanguard Funds With Dynamic Asset Allocation: Three iM-Vanguard Systems
- iM-Vanguard Systems use a combination of Vanguard bond- and stock-funds, and switch assets according to stock-market climate.
- Backtests show that models using index funds produce better returns when a dynamic asset allocation strategy is employed (System1) than buy-and-hold.
- Higher returns can be obtained from actively managed Vanguard funds with dynamic asset allocation (System2 and System3). System3 uses only two stock funds and one intermediate-term bond fund.
The dynamic asset allocation strategy requires that during up-market periods more money is allocated to stock funds than bond funds, and during down-market periods more money is allocated to bond funds than stock funds.
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iM-USMV Investor Portfolio
The iM-USMV Investor Portfolio consists of the four quarterly displaced Best12(USMV)-Investor models at iMarketSignals. The purpose of the combination model is to check whether our hypothesis – ranking the holdings of USMV, the iShares MSCI USA Minimum Volatility ETF, and selecting a portfolio of the 12 top ranked stocks, provides higher returns for the portfolio than for the underlying ETF – is supported by the actual performances of the model over longer period of time.
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iM-Best(SPY-IEF) Market Timer: A Combination of Three Market Timing Models
- Stock market timing models usually provide discreet signals indicating whether to be in or out of the market.
- A better approach with potentially less risk is to stage investments over time when entering or exiting the market.
- Three market timing models with low correlation to each other are used in combination to provide staged signals, indicating stock market investment in 25% increments from 0% to 100%.
US Treasury Bonds: When Will the Panic Buying End?
- Currently the yield of 30-year US Treasury Bonds is at its lowest level ever.
- The bond-market rally which began at the beginning of 2014 is near its end.
- Some upside for long Treasury bonds is still possible, but not much.
There is no reason why the Fed should increase the Federal Funds Rate any time soon.
In October 2014 the FED announced that QE has ended and that it is keeping record low interest rates for “a considerable time”. The question arises “When will the FED increase interest rates?” Some analysts are speculating for rate hikes in April or May this year. We believe that history may provide better guidance.
With reference to Section 202(a)(11)(D) of the Investment Advisers Act:
We are Engineers and not Investment Advisers,
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