Very Simple Asset Class ETF Momentum Strategy (VSACEMS) with DBC

In response to Very Simple Asset Class ETF Momentum Strategy (VSACEMS), a subscriber requested evaluation of an alternative VSACEMS that considers only the following three exchange-traded funds (ETF):

• SPDR S&P 500 (SPY)
• iShares Barclays 20+ Year Treasury Bond (TLT)
• Invesco DB Commodity Index Tracking (DBC)

To evaluate, we test a strategy that each month picks the one of these ETFs with the highest total return over a set momentum ranking (lookback) interval. We consider lookback intervals of one to 12 months. We then select one of these lookback intervals and generate performance statistics similar to those for SACEMS. We consider three benchmarks:

1. SPY – buy and hold SPY.
2. SPY:SMA10 Cash – Hold SPY (3-month U.S. Treasury bills) when SPY is above (below) its 10-month simple moving average (SMA10) at the end of the prior month.
3. SPY:SMA10 TLT – Hold SPY (TLT) when SPY is above (below) its SMA10 at the end of the prior month.

Using monthly dividend-adjusted prices for the above three assets during February 2006 (limited by DBC) through April 2022, we find that: (more…)