Correction: An earlier version of this edition incorrectly noted that iShares iBoxx $ Investment Grade Corporate Bonds (LQD) was the only ETF on our proxy list for the major asset classes with a bearish MOM score.
I am avid fan of your Capital Spectator site, appreciating its sage advice and clear prose.
A couple questions about the G.B16 portfolio and the active strategies.
1) The G.B16 portfolio lacks a small cap ex-US ETF, say, for example, VSS. Is there a logic for its absence?
2) The stellar performance of the G.B16.MVOL for 2020 (up 30%) certainly makes it a seemingly appealing strategy. But is it your sense this is maybe a bit of an one-off performance? One maybe attributed to high volatility during March’s descent followed by a relatively low volatility during the subsequent climb back up?
3) You’ve observed previously that normally the G.B16.MVOL has at least one asset in the risk-off category. Yet I don’t see any sell signals after March. In fact, looking at VTI as an example, I don’t see any sell triggers starting 2016 and prior to March 2020. (This assumes I have correctly incorporated the filters for the triggers into the data analysis.) Does this make sense?
Dan, Apologies for the late reply. To answer your questions:
1) As you point out, G.B16 doesn't slavish cover every corner of the global markets in detail via specific funds. That would be onerous and probably not productive since some of these niches are relatively small in terms of market cap. Of course, they may be productive for customizing portfolios. But in the first approximation approach I take here I'm basically using the global stocks/bonds/real estate/commodities buckets broken into the markets I regularly review here: http://bit.ly/2X71EE7 This is just one of many ways to slice and dice, of course. That said, all the principal risk buckets are covered in G.B16, including the VSS corner, even though there isn't a formal allocation to foreign small cap.
2) To some extent G.B16.MVOL is a one-off event in that it caught the spring 2020 crash early and got out of the way. Unclear if it'll do as well in the next big event, but I'm modestly optimistic since the key stat that lead to the risk-off signal (a relatively large rise in vol) would likely precede another sharp selloff. That said, a robust out-of-sample test awaits. Stay tuned.
3) After the risk-off signals in the spring of 2020, G.B16.MVOL soon after returned to a risk-on posture (for the most part), with a few noisy exceptions along the way. But vol overall has remained relatively tame and so a broad risk-off signal has yet to be triggered for this strategy.
Mr. Picerno:
I am avid fan of your Capital Spectator site, appreciating its sage advice and clear prose.
A couple questions about the G.B16 portfolio and the active strategies.
1) The G.B16 portfolio lacks a small cap ex-US ETF, say, for example, VSS. Is there a logic for its absence?
2) The stellar performance of the G.B16.MVOL for 2020 (up 30%) certainly makes it a seemingly appealing strategy. But is it your sense this is maybe a bit of an one-off performance? One maybe attributed to high volatility during March’s descent followed by a relatively low volatility during the subsequent climb back up?
3) You’ve observed previously that normally the G.B16.MVOL has at least one asset in the risk-off category. Yet I don’t see any sell signals after March. In fact, looking at VTI as an example, I don’t see any sell triggers starting 2016 and prior to March 2020. (This assumes I have correctly incorporated the filters for the triggers into the data analysis.) Does this make sense?
Thanks, Dan M.
Dan, Apologies for the late reply. To answer your questions:
1) As you point out, G.B16 doesn't slavish cover every corner of the global markets in detail via specific funds. That would be onerous and probably not productive since some of these niches are relatively small in terms of market cap. Of course, they may be productive for customizing portfolios. But in the first approximation approach I take here I'm basically using the global stocks/bonds/real estate/commodities buckets broken into the markets I regularly review here: http://bit.ly/2X71EE7 This is just one of many ways to slice and dice, of course. That said, all the principal risk buckets are covered in G.B16, including the VSS corner, even though there isn't a formal allocation to foreign small cap.
2) To some extent G.B16.MVOL is a one-off event in that it caught the spring 2020 crash early and got out of the way. Unclear if it'll do as well in the next big event, but I'm modestly optimistic since the key stat that lead to the risk-off signal (a relatively large rise in vol) would likely precede another sharp selloff. That said, a robust out-of-sample test awaits. Stay tuned.
3) After the risk-off signals in the spring of 2020, G.B16.MVOL soon after returned to a risk-on posture (for the most part), with a few noisy exceptions along the way. But vol overall has remained relatively tame and so a broad risk-off signal has yet to be triggered for this strategy.
Dan, apologies for not responding. Sooner. I'll answer these questions within a few days. I haven't been monitoring the comments. Sorry.