Bold Asset Allocation

Bold Asset allocation strategy is derived from Dr. Wouter Keller's research, specifically his paper titled Relative and Absolute Momentum in Times of Rising/Low Yields: Bold Asset Allocation (BAA). Bold asset allocation has achieved stellar performance historically based on statistical metrics used by MacroVar.

Strategy current allocation

Bold Asset allocation Equity Curve

Bold Asset Allocation strategy statistics

Bold asset allocation strategy is based on three asset groups: offensive, defensive and canary.
The trading strategy operates on a monthly basis, making its moves at the close of the last trading day each month. Here's how it works:

1. It begins with a predefined set of assets, called the "canary universe," which includes the S&P 500 (represented by SPY), developed international equities (EFA), emerging market equities (EEM), and US aggregate bonds (AGG).
   
   The strategy evaluates the "13612W" momentum of each asset. This momentum metric considers different timeframes and is calculated as follows:
   
   (12 * (p0 / p1 – 1)) + (4 * (p0 / p3 – 1)) + (2 * (p0 / p6 – 1)) + (p0 / p12 – 1)
   
   Where p0 represents the current price, p1 is the price at the end of the previous month, and so on. It's worth noting that this approach places more weight on recent price changes.
   
   
2. If all the assets in the canary universe exhibit positive momentum, the strategy selects assets from the offensive universe. If any of the canary assets show negative momentum (which occurs approximately 60% of the time), the strategy shifts to the defensive universe. US aggregate bonds (AGG) are included in the canary universe due to their predictive value for risk asset returns.


3. Within the selected universe (offensive or defensive), the strategy calculates relative momentum as follows:
   Relative Momentum = p0 / average(p0…p12)
   This is the current price divided by the average of the prices from the past 13 months.
   
   
4. If selecting from the offensive universe, the strategy chooses either 6 assets (balanced version) or 1 asset (aggressive version) with the highest relative momentum. It's important to note that the aggressive version is riskier and not recommended as a sole strategy.
   
   
5. If selecting from the defensive universe, the strategy picks the 3 assets with the highest relative momentum. If the relative momentum of an asset is lower than that of US T-Bills (represented by ETF: BIL), the corresponding portion of the portfolio is allocated to cash.


6. All selected assets are equally weighted in the portfolio, and the portfolio is rebalanced even if there is no change in the signal. Positions are held until the end of the following month.
   In summary, the strategy assesses the momentum of assets in the canary universe and uses relative momentum to choose assets from either the offensive or defensive universe, depending on the momentum status of the canary assets. It combines both relative and absolute momentum, referred to as "dual momentum." The aggressive version is considered riskier, and it is recommended to diversify risk by combining multiple unrelated strategies in a combined portfolio.
   
   How BAA will protect you for a Low/Rising Yield Environment
   
   The utilization of "dual momentum" in the strategy's defensive asset selection is likely a more prudent approach for the future, regardless of historical performance.
   When transitioning from a risk-on to a risk-off regime, certain strategies tend to unwisely shift the portfolio entirely into assets highly sensitive to interest rate fluctuations, such as long-duration government bonds, without considering their current performance.
   This strategy proved effective for most of the past four decades due to a prolonged decline in interest rates, providing a consistent tailwind that made government bonds a dependable diversification option. However, as we have demonstrated through various models, once this long-term rate decline reaches its conclusion, government bonds will inevitably fall short of the performance norms that investors have become accustomed to. To learn more, refer to our previous research.
   By establishing the requirement that defensive asset momentum must exceed T-Bill momentum, we ensure that we do not choose interest rate-sensitive assets experiencing prolonged weakness."

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   Bold Asset Allocation returns

   retid	id	Year	January	February	March	April	May	June	July	August	September	October	November	December	Year
   55	2	1970	0,70	0,50	0,60	0,60	0,60	0,60	0,60	0,50	0,50	0,50	0,40	0,40	6,60
   56	2	1971	0,40	-1,80	4,30	0,60	-3,90	0,30	-3,90	3,90	-0,40	-3,90	0,00	8,90	3,70
   57	2	1972	2,10	2,40	1,20	0,70	1,80	-1,80	0,50	3,70	-0,30	1,20	5,00	1,20	18,80
   58	2	1973	-1,50	-3,50	0,10	0,20	-1,20	0,50	0,70	0,80	0,60	0,70	0,70	0,60	-1,60
   59	2	1974	0,70	0,50	0,70	0,70	0,70	0,60	0,70	0,80	0,60	0,70	0,60	0,60	8,20
   60	2	1975	0,50	0,40	-2,80	5,10	4,80	4,80	-6,40	-1,80	-3,10	6,50	2,80	-0,80	9,50
   61	2	1976	12,20	-0,80	3,40	-0,80	-1,10	4,40	-0,50	-0,20	1,60	0,40	0,40	0,40	20,10
   62	2	1977	0,40	0,40	0,40	0,40	0,40	0,40	0,40	-1,10	0,10	-3,90	3,10	0,70	1,50
   63	2	1978	-5,70	-2,00	2,90	9,00	0,80	-1,30	5,80	3,00	-0,30	-8,80	2,10	1,90	6,30
   64	2	1979	4,40	-3,20	6,00	0,60	-2,20	4,30	1,30	4,90	0,80	1,10	1,00	1,00	21,20
   65	2	1980	1,10	1,00	1,30	1,10	0,70	0,60	0,70	0,80	0,90	1,10	1,00	1,40	12,10
   66	2	1981	1,30	1,10	1,20	-0,30	0,20	-0,60	0,20	1,00	1,20	1,20	0,90	0,20	7,70
   67	2	1982	-4,50	1,00	1,20	1,10	1,00	1,10	0,90	0,80	0,70	0,50	4,00	1,90	9,90
   68	2	1983	3,70	2,30	3,70	7,90	-0,90	3,90	-3,00	1,50	1,40	-1,20	2,10	-0,50	22,40
   69	2	1984	-0,60	-3,50	1,70	-0,10	0,90	0,80	0,80	1,00	0,80	0,70	0,30	0,60	3,50
   70	2	1985	0,70	0,60	0,70	0,70	3,10	1,50	-0,20	-0,90	-3,10	4,60	6,80	4,80	20,80
   71	2	1986	0,50	7,50	5,60	-1,10	5,30	-0,20	0,50	0,50	0,00	5,80	2,40	-2,60	26,30
   72	2	1987	9,90	0,40	1,50	-0,90	0,80	5,00	5,10	3,70	-2,20	-21,50	-1,70	0,50	-3,00
   73	2	1988	0,50	3,40	-3,10	1,10	0,90	4,60	-0,40	-3,40	4,30	2,80	-1,40	1,70	11,00
   74	2	1989	7,30	-2,50	3,10	0,70	0,70	0,70	0,60	2,40	-1,50	0,70	0,60	0,60	14,10
   75	2	1990	0,70	0,60	0,70	0,60	0,70	0,60	0,60	0,70	0,60	0,70	0,60	0,50	7,80
   76	2	1991	0,50	0,40	0,70	0,20	4,30	-4,60	4,70	0,70	0,80	1,00	0,40	0,30	9,60
   77	2	1992	-2,70	-0,10	0,40	0,30	0,30	0,30	0,30	0,30	0,20	0,30	0,20	0,90	0,50
   78	2	1993	0,80	1,10	2,20	-2,60	2,70	0,40	-0,50	3,80	-0,70	2,00	-1,10	1,20	9,60
   79	2	1994	3,50	-2,90	-4,20	1,10	1,60	-2,30	3,20	3,80	-2,50	2,80	-4,00	0,70	0,40
   80	2	1995	3,30	0,40	0,50	0,40	0,50	0,50	0,40	0,50	0,40	0,50	0,40	0,40	8,70
   81	2	1996	0,40	0,40	0,40	1,90	2,30	0,90	-4,50	1,90	5,60	3,20	7,30	-2,40	18,30
   82	2	1997	6,20	1,00	-4,40	6,30	6,30	4,10	7,90	-5,20	4,80	-2,50	3,00	0,50	30,50
   83	2	1998	0,40	0,40	0,40	0,40	0,40	0,40	0,40	0,40	0,40	0,30	0,40	6,10	10,90
   84	2	1999	3,50	-3,20	4,10	3,80	-2,30	5,50	-3,10	-0,50	-2,20	6,40	1,70	5,70	20,40
   85	2	2000	-5,00	-1,50	9,70	-3,50	0,30	0,50	0,50	0,60	0,50	0,50	0,50	0,50	2,80
   86	2	2001	0,40	0,40	0,40	0,30	0,30	0,30	0,30	0,30	0,20	0,20	0,20	0,30	3,60
   87	2	2002	-1,00	-1,80	3,30	-5,80	-0,60	-7,40	-6,70	0,10	0,10	0,10	2,80	-5,70	-20,90
   88	2	2003	-2,50	-0,60	0,10	0,10	0,10	-3,70	1,80	2,10	-1,10	5,40	1,10	5,00	7,70
   89	2	2004	2,00	1,40	-1,30	-1,90	1,70	1,90	-3,20	0,20	1,00	1,30	5,20	0,50	8,70
   90	2	2005	-2,20	2,50	0,20	0,20	2,30	0,20	3,80	-0,90	0,80	-2,40	4,40	-0,20	8,80
   91	2	2006	2,40	0,60	1,70	1,30	-3,00	0,30	0,40	0,70	0,40	0,80	2,00	1,30	9,10
   92	2	2007	1,50	-2,00	1,20	4,40	1,60	-1,60	-3,10	-3,10	0,30	0,40	0,30	0,20	-0,20
   93	2	2008	0,20	0,20	0,10	0,10	0,10	0,20	0,10	0,10	0,10	0,10	0,00	0,00	1,30
   94	2	2009	0,00	0,00	0,00	0,00	4,20	-0,10	7,50	3,70	3,50	-1,90	6,20	1,90	27,60
   95	2	2010	-3,60	3,10	6,10	1,50	-7,90	-5,20	6,80	-4,50	9,00	3,80	0,00	6,70	15,10
   96	2	2011	2,30	3,50	0,00	-0,50	0,00	0,00	0,00	0,00	0,00	0,00	0,00	0,00	5,40
   97	2	2012	0,00	1,70	3,20	-0,70	-6,00	2,50	0,00	0,00	0,00	0,00	0,00	-0,30	0,10
   98	2	2013	5,10	1,30	3,80	1,90	2,40	-1,30	5,20	-3,00	3,20	4,60	3,00	2,60	32,30
   99	2	2014	-3,50	4,60	0,80	0,70	2,30	2,10	-1,30	1,30	-0,60	2,40	2,70	-0,30	11,40
   100	2	2015	-3,00	5,60	-1,60	1,00	1,30	-1,10	-0,20	-0,10	0,00	0,00	1,40	-1,70	1,50
   101	2	2016	-5,00	-2,10	0,00	0,00	1,40	0,30	3,60	0,10	0,00	-1,70	3,70	2,00	2,10
   102	2	2017	1,80	3,90	0,10	1,00	1,40	0,60	2,10	0,30	2,00	2,40	3,10	1,20	21,70
   103	2	2018	5,60	-3,20	0,10	0,10	0,20	0,20	0,20	0,20	0,20	0,20	0,20	0,20	4,00
   104	2	2019	0,20	0,20	0,20	0,20	0,20	0,20	0,20	0,20	0,20	0,20	0,10	1,20	3,20
   105	2	2020	0,00	4,60	0,00	0,00	0,00	0,80	5,90	7,00	-3,70	-2,50	10,90	3,70	28,90
   106	2	2021	-1,00	2,80	4,50	5,30	0,70	2,20	2,40	3,00	-4,70	7,00	-0,80	3,20	27,00
   107	2	2022	0,00	0,00	0,00	0,10	0,10	0,10	0,20	0,20	0,30	0,30	0,30	0,40	2,10
   108	2	2023	0,40	0,40	0,40	0,40	1,30	6,50	3,10						12,90