Tactical Asset Allocation – July 2017

Tactical Asset Allocation Strategy Update


Global Core is up 1.35% MTD and up 7.35% YTD

Domestic US Big Cap did 80% of the lifting this month while our smaller positions in International, Emerging Markets, and Treasuries contributed the other 20%.


Equity markets were up globally this month with International Developed and Emerging Markets out-performing the US. Strength in the US market has been highly concentrated in a handful of wildly popular "can't miss" stocks. Mid and Small Cap stocks lagged. The fixed income market moved sideways.

Upgraded Market Risk Model

This Bull Market is going to come to an end, sooner or later. It will die on its own excesses or on withdrawal of liquidity from Central Banks.

I have devoted considerable time and effort to researching the characteristics of Bear Markets with an eye to enhancing the Market Risk Model.

I created the Market Risk Model two years ago to identify favorable risk conditions under which our Global Satellite Strategy should be deployed to deliver high returns without incurring excessive risk. The efficacy of this approach is demonstrated by results which have delivered returns nearly double that of the Global Core Strategy during Favorable risk conditions which exist during roughly 50% of a full Market Cycle.

I am introducing an upgraded Market Risk Model which signals three risk conditions: Favorable, Balanced, and Hostile:

  • Favorable: strong market with little risk of major decline, suitable for Satellite Strategy
  • Balanced: risks of decline and opportunity for advance is roughly equal, suitable for Core Strategy (primarily equities)
  • Hostile: high risk of extended market decline and large drawdowns, suitable for Core Strategy (primarily fixed income)

Understand that we are measuring probabilities here, not certainty. Favorable does not come with a guarantee of a Bull Market nor does Hostile come with a guarantee of a Bear Market.

The upgraded Market Risk Model combined with the Core and Satellite Strategies have been very effective in far out-performing the S&P 500 during every market condition as well as over a full cycle.

I am in the process of writing a Featured Article covering the Market Risk Model complete with graphics showing historical and market condition segmented performance. I am also putting the finishing touches on a new Global Satellite (Hostile) Strategy which delivers significant additional full cycle performance.

Earl Adamy

Tactical Asset Allocation Strategy Performance

Global Strategy (Conservative)

Month: 1.35% gain
Year-to-date: 7.35% gain
Full cycle-to-date (Sep 2007): 13.21% CAGR, 6.53% Max Monthly Drawdown

Global Strategy (Aggressive)

Month: 1.35% gain
Year-to-date: 7.35% gain
Full cycle-to-date (Sep 2007): 16.61% CAGR, 8.22% Max Monthly Drawdown

Tactical Asset Allocation Fund Basket Performance

Global Core

Month-to-date: 1.35% gain
Year-to-date: 7.35% gain
Full cycle-to-date (Sep 2007): 10.24% CAGR, 6.53% Max Monthly Drawdown

Global Satellite

Month-to-date: hibernating since Nov 2014
Year-to-date: hibernating since Nov 2014
Full cycle-to-date (Sep 2007): 26.87% CAGR@Risk*, 8.22% Max Monthly Drawdown

*CAGR for the "Favorable" Market Conditions during which Global Satellite was invested