Proprietary Models

We designed our public dual momentum model, GEM, to be simple and easy to use by do-it-yourself investors. GEM introduced dual momentum to the world.

The aim of our proprietary models is to achieve the most consistent returns possible using all available momentum tools. We license our proprietary model signals to substantial private investors and a few select advisors who use them to manage accounts.

Proprietary models strive to be highly adaptive to market conditions and often serve as the basis for core portfolios. They have their foundation in academic research supported by out-of-sample and real-time validation. Here are our proprietary models:

Dual Momentum Fixed Income (DMFI)

Dual momentum works as well with fixed income as with equities. DMFI applies dual momentum to short and intermediate segments of the bond market. Since 1970, DMFI has had the same return as the S&P 500 with considerably less volatility.

Enhanced Global Balanced Momentum (E-GBM)

E-GBM is a balanced allocation between stocks, bonds, and other assets. It is a general-purpose dual momentum model suitable for most investors. At the end of 2021, we merged E-GBM with our Enhanced Global Equities Momentum (E-GEM) model.

Advanced Global Equities Momentum (A-GEM)

A-GEM focuses on the stock market but includes bonds and other assets when market conditions warrant it. A-GEM adds market structure and breadth to dual momentum for determining trends. It uses both daily and monthly data.

NASDAQ Breadth and Trend (QBAT)

QBAT applies breadth, trend, intermarket strength, speculative sentiment, and mean reversion to the ProShares Ultra QQQ ETF (QLD). When not invested in QLD, QBAT holds the same positions as A-GEM. QBAT is our most advanced model. QBAT uses only daily data and is also our most responsive model.

Performance

Here is the performance of our Dual Momentum Fixed Income (DMFI) model compared to Aggregate Bonds, 10-Year Treasury Bonds, and the S&P 500 index.

DMFI Model Performance Jan 1970 through Dec 2022

	DMFI	AGG	10 YR	S&P 500
CAGR	10.6	6.9	7.2	10.5
Standard Deviation	5.1	5.3	8.0	15.4
Sharpe Ratio	1.13	0.40	0.33	0.43
Worst Drawdown	-6.1	-17.2	-21.0	-51.0
Average Drawdown	-0.6	-1.1	-2.2	-7.5
% Up Months	82	68	60	63

Results do not guarantee future success and do not represent returns that any investor attained. You cannot invest directly in our models. AGG is the Bloomberg Barclays U.S. Aggregate Bond Index from its starting date of July 1983 and the Ibbotson 5-Year U.S. Government Bond Index before that. 10 YR is the ICE U.S. Treasury 7-10-Year Bond Index. CAGR is the compound annual growth rate. Drawdowns are on a month-end basis. Please see the Disclaimer page for additional information.

Here are the back-tested results of E-GBM compared to the S&P 500, a 60/40% balanced stock/bond portfolio, and our public GEM model.

E-GBM Model Performance Jan 1970 through Dec 2022

	E-GBM	GEM	S&P 500	60/40
CAGR	16.1	15.3	10.6	9.2
Standard Deviation	8.7	12.6	15.4	10.1
Sharpe Ratio	1.30	0.87	0.46	0.52
Worst Drawdown	-9.0	-19.6	-51.0	-29.7
Average Drawdown	-1.0	-3.0	-7.5	-3.2
% Up Months	76	68	63	63

Historical data and analysis should not be taken as an indication or guarantee of future performance. We have subtracted transaction slippage of 0.1% per trade. Performance does not represent actual fund or portfolio performance. Performance includes reinvestment of interest and dividends. CAGR is the compound annual growth rate. 60/40 is 60% S&P 500 Index and 40% ICE U.S. Treasury 7-10 Year Bond Index. Worst drawdown is on a cumulative month-end basis. Please see the Disclaimer page for more information.

Here are the back-tested results of the current versions of our A-GEM and Enhanced Global Balanced Momentum (E-GBM) models compared to the S&P 500, a 70%/30% balanced stock/bond portfolio, our public Global Equities Momentum (GEM), and a 50/50% blend of A-GEM/E-GBM. Results begin in January 1999 due to limited daily data before then. We have extended ETF data with associated index data when necessary.

A-GEM Model Performance January 1999 through Dec 2022

	S&P 500	BALANCED	GEM	E-GBM	A-GEM	50/50
CAGR	6.7	6.3	9.4	13.2	17.0	15.2
STD DEV	15.9	11.8	11.9	9.1	11.0	9.0
SHARPE	0.49	0.57	0.82	1.41	1.49	1.63
MAX DD	-51.3	-38.1	-19.6	-7.5	-11.4	-8.2
AVG DD	-10.6	-5.4	-4.5	-1.4	-1.7	-1.2
% UP MOS	64	63	67	70	69	69

Results do not guarantee future success and do not represent returns that any investor attained. We have subtracted estimated transaction slippage of 0.1% per trade. Performance includes reinvestment of interest and dividends. CAGR is the compound annual growth rate. BALANCED is 70% S&P 500 Index and 30% ICE U.S. Treasury 7-10 Year Bond Index. Maximum drawdown is on a cumulative month-end basis. See our Disclaimer page for more information.

Here are the back-tested results of QBAT compared to QQQ, the S&P 500, Global Equities Momentum (GEM), Enhanced Global Balanced Momentum (E-GBM), and Advanced Global Equities (A-GEM). We also show 50%/30%/20%, and 50%/40%/10% allocations to A-GBM, E-GEM, and QBAT, as well as a 25% allocation to each and to Dual Momentum Fixed Income (DMFI). The 50%/50% allocation is to only E-GBM/A-GEM. Even a 10% allocation to QBAT substantially boosts the expected return of a 50%/50% E-GBM/A-GEM while keeping volatility at a modest level.

QBAT Model Performance July 2006 through December 2022

	QQQ	S&P500	GEM	DMFI	E-GBM	A-GEM	QBAT	25 ALL	50/30/20	50/40/10	50/50
CAGR	13.3	9.0	7.8	9.9	11.6	15.2	39.4	19.2	18.3	15.9	13.5
STD DEV	19.5	16.6	12.5	4.9	8.1	10.8	24.2	10.2	10.7	9.5	8.5
SHARPE	0.74	0.60	0.65	1.95	1.40	1.38	1.51`	1.77	1.63	1.61	1.54
MAX DD	-50.2	-51.3	-19.6	-5.3	-7.3	-11.4	-23.2	-10.6	-10.8	-9.5	-8.2
AVG DD	-6.9	-7.2	-5.4	-0.5	-1.3	-1.7	-3.0	-1.2	-1.4	-1.3	-1.3
W% MOS	66	68	66	80	68	68	67	70	70	70	66

Portfolio Effect

Our models do best when used in combination because of their strategy differences and modest correlations. Here are the monthly correlations from July 2006.

	QBAT	A-GEM	E-GBM	DMFI	S&P 500	QQQ
QBAT	1.00	0.78	0.60	0.25	0.52	0.61
A-GEM		1.00	0.62	0.31	0.55	0.56
E-GBM			1.00	0.55	0.49	0.49
DMFI				1.00	0.21	0.17
S&P 500					1.00	0.92

We can also combine QBAT with DMFI to create a “barbell approach” of non-correlated low and high-volatility strategies. Here are the back-tested results since July 2006 with 50%/50%, 60%/40%, 70%/30%, 80%/20%, and 90%/10% in DMFI and QBAT. Since QBAT is invested the same as A-GEM when it is not in QLD, these allocations are an amalgamation of three different models.

QBAT with DMFI Model Performance July 2006 through December 2022

	QQQ	DMFI	QBAT	50/50	60/40	70/30	80/20	90/10
CAGR	13.3	9.9	39.4	24.8	21.8	18.8	15.9	12.8
STD DEV	19.5	4.9	24.2	12.9	10.8	8.8	6.9	5.5
SHARPE	0.74	1.95	1.51	1.79	1.89	2.02	2.16	2.22
MAX DD	-50.2	-5.3	-23.2	-12.9	-11.0	-9.2	-7.3	-5.5
AVG DD	-6.9	-0.5	-3.0	-1.3	-1.1	-0.8	-0.6	-0.5
W% MOS	66	80	67	70	72	73	76	82

Results are not a guarantee of future success and do not represent returns that any investor actually attained. Performance includes reinvestment of interest and dividends. CAGR is the compound annual growth rate. Maximum drawdown is on a cumulative month-end basis. Leveraged ETFs have high risk and extreme volatility. Please see our Disclaimer page for more information.