Asset Class Trend Following with a Ten-Month Moving Average

Summary

This document describes a tactical allocation rule that uses a ten-month simple moving average to time exposure across asset classes. Its example holds five equally weighted ETFs covering US and foreign equities, bonds, real estate, and commodities when each is above its moving average; otherwise, that allocation moves to cash. The broader rationale is that trend filters may reduce exposure during weak market regimes, lowering volatility and drawdowns while retaining participation in stronger periods. The strategy is presented as a simple market-timing overlay rather than an optimized model.

The page cites research reporting improved risk-adjusted outcomes and describes historical results beginning in 1973, while the source-paper summary says the approach held up in real time through 2012. These are historical claims, not guarantees, and the document does not provide enough detail here to reproduce the full tests or assess all implementation costs. The approach can reduce equity exposure during stress, but it is framed as a portfolio allocation tool rather than a direct hedge.

Key ideas

• The example uses a ten-month simple moving average to determine whether to hold each asset class ETF or cash.
• The five-ETF portfolio spans domestic and foreign equities, bonds, REITs, and commodities.
• Trend filters are intended to reduce exposure during weaker market regimes and limit portfolio drawdowns.
• The document presents the rule as a simple tactical allocation framework that investors may adapt.
• Historical results cited on the page do not guarantee future performance, and full testing details are not provided.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.