- momentum strategy
- rebalances monthly w/ possible daily exit
Market Vane is a proprietary sentiment indicator for the U.S. stock market, which we first introduced in January 2021. Market Vane can be used for a wide array of investment applications. The Market Vane strategy denotes the simplest among them: a strategy switching between an ETF tracking the S&P 500 and another tracking 10-Year U.S. Treasuries.
Market Vane technically might change its asset allocation any day. However, it changes its asset allocation only infrequently, often holding positions for many months. Consequently, the strategy's maintenance requirements are remarkably low.
The chart above shows the portfolio's historical performance and drawdowns, compared to their benchmark, throughout the simulation. The chart below shows the portfolio's annual returns:
This table shows the performance metrics for TuringTrader's Market Vane:
The portfolio last required rebalancing after the exchange's close on n/a. Due to fluctuations in asset prices and portfolio values, the exact allocations vary daily. The current asset allocation is as follows:
The operation of the Market Vane strategy can be summarized as follows:
- hold S&P 500 while the Market Vane indicator is positive
- hold 10-Year U.S. Treasuries otherwise
Market Vane holds only a single ETF at a time, representing either the S&P 500, or 10-Year U.S. Treasuries. Because Market Vane can exit the stock market any day in case volatility spikes or the index suffers severe drawdowns, the strategy deals very well with any risks evolving over several days. Further, because U.S. Treasuries are among the most trustworthy investments available, and Market Vane only uses intermediate maturities, it is also relatively stable in environments of rising yields.
The Monte-Carlo simulation of historical returns shows that Market Vane's form of serial diversification greatly reduces risk, while, in the long term, offering a solid upside over the S&P 500.
Returns & Volatility
During bullish periods, Market Vane keeps up with the S&P 500. However, when the stock market turns sour, Market Vane quickly exits risky assets and flees into the safety of U.S. Treasuries. As a result, the strategy gains over its benchmark during pronounced downturns, with only brief periods of underperformance.
Account & Tax Considerations
While Market Vane trades only infrequently, it might hold assets for less than 12 months, leading to short-term capital gains. Consequently, the strategy works best in tax-deferred acccounts.
Because Market Vane holds only a single ETF at a time, a minimum investment of $1,000 is all it needs to get started.