TAA Model for June, 2012
This is a monthly feature at the MarketSci Blog.
Our Tactical Asset Allocation (TAA) model selects up to four assets from a diverse basket of asset classes on the final trading day of each month. Below is the new allocation for today’s close. Click to read more about the TAA model.
I eat my own cooking, so I’ve devoted a healthy share of my own net worth to the TAA model (read why). On the last day of each month I share my new allocation (see above) and real-time performance (see below).
The model underperformed its benchmark in May, returning (as of 05/30) -2.6% versus -1.7%.
For June, the model will be dropping gold (GLD) in favor of a larger position in U.S. Treasuries (IEF).
The model has stacked up well against similar active strategies like Cambria’s ETF GTAA and the Permanent Portfolio (PRPFX), but has lagged what I think is the most important benchmark, a passive investment in equities and Treasuries rebalanced monthly (see stats below).
As I’ve discussed before, the model would historically have gone through extended periods of underperforming its benchmark, especially when the benchmark has been strong. This is a “generational” model and I’m much more concerned with returns over the next decades than any one month or year (read more). Real-time results have most definitely been in line with backtests.
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Happy Trading,
ms
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Filed under: Tactical Asset Allocation | 2 Comments
Interesting model.
My only thought is that regime-switching models probably work better at non-standard times such as this, especially with macro models.