Monthly Relative Momentum for Multi-Asset ETF Allocation

Summary

This strategy ranks five ETFs representing US stocks, foreign stocks, bonds, real estate, and commodities by their trailing 12-month returns. It selects the three strongest, weights them equally, holds them for one month, then repeats the ranking and rebalances. The approach is cross-sectional or rotational momentum: capital shifts toward the asset classes that have recently performed best. The document describes its purpose as tactical allocation and as a way to adjust exposure to equity-like assets, rather than as a direct hedge.

The page reports that related research found momentum across asset classes and describes robust results across measurement periods and decades, including evidence said to survive transaction costs and stability tests. It also cites a source paper reporting outperformance over a buy-and-hold benchmark in approximately 70% of years, with a trend filter reducing volatility and drawdown. These claims are summaries of cited work, not a complete replication record. The excerpt gives no full backtest statistics or detailed implementation assumptions, and its related research notes that ETF momentum effectiveness may vary over time and with parameter choices.

Key ideas

• Rank the five listed asset class ETFs by their returns over the prior 12 months.
• Hold the top three ETFs at equal weights for one month, then rebalance.
• The rotation seeks exposure to recent relative winners across stocks, bonds, real estate, and commodities.
• The document describes the allocation as a tactical overlay that can alter equity-like exposure.
• Cited research reports robustness but also highlights time variation and parameter sensitivity.

Tags

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