The usual disclaimers apply for the strategies and the analysis on TrendInvestorPro. Past performance does not guarantee future performance. You and you alone are responsible for your investment and trading decisions. Do your own due diligence.
This page is updated at the end of every quarter.
Performance Metrics for RO-Trader-SPX (last close: 31-Dec-24)
The table below shows performance metrics for the S&P 500 Rotation Trader Strategy (RO-Trader-SPX) and $SPX buy-and-hold. RO-Trader-SPX outperformed buy-and-hold with a significantly higher Compound Annual Return: +14.56% vs +8.99% (green shading). Just as important, the strategy’s Maximum Drawdown (-18.86%) is around a third that of buy-and-hold (-56.59%) and the Average Drawdown was 16.40% (blue shading)
The strategy has a long-term Win Rate of 57%, which means 43% of the trades resulted in losses. The average gain (+7.53%) is around 50% higher than the average loss (-5.18%). This strong Win Rate and Gain/Loss ratio combine to produce a Profit Factor of 1.87, which means the strategy earned $1.87 profit for every $1 loss.
The chart below shows the equity curves for the strategy (green line) and for S&P 500 buy-and-hold (black line). The equity curve for the strategy surged in 2024 and hit a new high in November. Overall, the strategy outperforms by tripling ending equity for $SPX buy-and-hold ($1,944,900 vs $647,022). Also note that $SPX buy-and-hold experienced large drawdowns in 2008 (-56%) and 2022 (-25%). Notice how $SPX buy-and-hold (black line) turned negative as it dipped below $100,000 in 2008. The strategy mitigated drawdowns and preserved capital by using a market filter. The equity line was flat in 2008 because the strategy was in cash.
The next image shows the annual returns for the strategy. 2024 is so far the second best year since 2003 and the fourth year with 30+ percent gains. Overall, there were 3 losing years, 18 winning years and one flat year (2008). The strategy was in cash throughout 2008 because the market filter was bearish. Note that these returns do not include dividends or interest earned on cash. The average return over the entire period is +14.4% per year (blue line) and the Annual Sharpe Ratio is 1.0, which means risk is commensurate with reward.
The next image shows the drawdowns over the entire period (blue line). Drawdown is the percentage decline from an equity high. Even though the equity curve and annual returns look good, there will be drawdowns and doubts along the way. The last double-digit drawdown was in December 2024. Note that 11-13 percent drawdowns occur on a regular basis. They look like small blips on the 20 year equity curve, but they are painful real time.
The next image shows the monthly return breakdown for the strategy. Hashmarks (-) show when the strategy was in cash because the market filter was bearish. Year-to-date, the strategy was up 35.9% on September 30th and up 45% on November 30th. A bad December erased the November gains and resulted in a negative quarter.
Trading a strategy is a long-term endeavor, not a brief undertaking. There will be ups, downs, periods of outperformance and periods of underperformance. We cannot judge performance using days, weeks or even a few months. Long-term endeavors require a minimum of six months before passing judgement. Past performance does not guarantee future performance, but this dual-momentum strategy should keep its edge as long as the momentum edge persists in the US equity market.
Testing Criteria
– Performance metrics are based on backtesting with historical constituents.
– Buy and sell signals are based on closing prices at the end of the week.
– Entries and exits are based on opening prices at the beginning of the week.
– Each buy/sell includes a .10% charge to account for slippage and commission.
– Each entry position is sized to be 1/8th of the portfolio
– The strategy holds a maximum of eight positions.
– Returns do NOT include dividends or interest earned from cash.
The usual disclaimers apply for the strategies and the analysis on TrendInvestorPro. Past performance does not guarantee future performance. You and you alone are responsible for your investment and trading decisions. Do your own due diligence.