Tactical Asset Allocation – August 2016

There is not much to be said about August … it went up and down and ended off slightly for the month. We’ve had a good run from the late June swoon and the market deserved a rest. Both the US and Global Core strategies have maintained a broad market mix of large, mid and small cap stocks along with some fixed income and that has provided us with a low volatility portfolio. Global Core has also taken a liking to small doses of precious metals. I have been slowly increasing my personal commitment to Global Core and will continue to do so until the US and Global Strategies are equal weight.

The US Core Strategy returned -0.13% in July. For the Year-To-Date: return is 6.65%, Compound Annual Growth Rate is 10.11%, Maximum Daily Drawdown is 3.7%, and Daily Standard Deviation is a very low 6.3%. Full metrics for the past 9+- years are included in the Performance Tables.

The Global Core Strategy returned -0.81% in July. For the Year-To-Date: return is 6.94%, Compound Annual Growth Rate is 10.55%, Maximum Daily Drawdown is 2.1%, and Daily Standard Deviation is a very low 5.1%. Full metrics for the past 9+- years are included in the Performance Tables.

I started the website with one Core Strategy and two Satellite Strategies. During the past six months, I've developed and introduced a new Global Core Strategy and more recently put the finishing touches on an improved Global Satellite Strategy (formerly Unleveraged Satellite).

Improvements to the Global Satellite Strategy significantly reduce the benefits of employing the Leveraged Satellite Strategy. Global Satellite has the advantages of avoiding 2X Leveraged ETFs, including a broader basket of funds, and employing lower fund concentrations. I believe that the marginally improved returns of Leveraged Satellite do not compensate for the higher risk so the Leveraged Satellite Strategy has been discontinued.

The real benefit of Global Satellite comes with the pairing of Global Core with Global Satellite which provides significant improvement over the old US Core+Unleveraged Satellite.

I have spent a good deal of time on the Risk Model during the past two months. I tested a number of substitute data series in the Model and found that the substitutions have no material effect upon model performance. We will stick with the original data series knowing that the concepts underlying the Risk Model are very robust.

I have added a new data series to the Risk Model. Inclusion of the new data series results in absolutely no change in historical performance of the TAAS Strategies; however it  will allow us to avoid some potentially poor risk/reward situations resulting from extremely high valuations.

Note to readers: This was prepared on the afternoon of September 3rd but could not be posted to the website due to issues which arose in moving the website to improved hosting ... a process which was promised to be seamless but developed some glitches. The good news is that website performance is much improved. I apologize for the delay.


2 thoughts on “Tactical Asset Allocation – August 2016”

  1. Thanks Earl, very pleased with results so far, and especially the low drawdown. I also am moving toward a 50/50 position in core/global core. The numbers look good!

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