Industry Momentum and Tactical Asset Allocation: 24% CAGR — Does It Beat SPY?
Welcome back to Avalon QuantBrief, where we put legendary quantitative frameworks to the test against modern market realities. Today, we are exploring a powerful dual-force model that combines Jegadeesh and Titman's classic industry momentum with Meb Faber's tactical asset allocation. By adapting these academic concepts with modern volatility filters, we aim to build a highly resilient strategy for today's hyper-fast regimes. Backtest Summary (2017–present) 📈 CAGR: 24.3% 📉 Max Drawdown: -19.8% ⚡ Sharpe Ratio: 1.20 💰 Total Return: 250.4% 🎯 Universe: XLK, XLF, XLY, XLP, XLV, XLI, XLE, XLU, XLB, IEF, SHY The Core Mechanics of Tactical Momentum The foundation of this strategy relies on trading nine major sector ETFs while utilizing IEF and SHY as defensive havens. While rebalancing occurs monthly, we run daily regime checks to ensure we are only risk-on when the SPY is above its 200-day simple moving average and realized volatility is low. If these conditions fail...