Tactical Asset Allocation – March 2022

Tactical Adaptive Strategies Update


Adaptive Global finished with a gain of 2.29% for the month and gain of 2.09% for the quarter and YTD. The strategy spent the month invested in commodities and cash. Adaptive Global is our most broadly diversified “go anywhere” strategy with a 22+ year CAGR of 14.8%, a very modest maximum drawdown of 7.7%, and a low 9.4% standard deviation of monthly returns.

Adaptive Income finished unchanged for the month and shows a loss of 0.98% YTD. It spent the month in cash. With a 22+ year CAGR of 9.6%, this strategy captures nearly $6+ dollars of gain for every $1 in loss. It sports our lowest maximum drawdown of 3.9% and our lowest volatility with a standard deviation of just 4.3%.

Adaptive Innovation finished unchanged for the months and shows a loss of 2.76% YTD. It spent the month in cash. This is a niche strategy intended to be used for a very small portion of a diversified portfolio. It sports a 6 year CAGR of 19.7%, maximum drawdown of 20.3%, and standard deviation of 17.1%.

The S&P 500 finished with a gain of 3.76% for the month and a loss of for the quarter and 4.62% YTD. It has a 22+ year CAGR of 7.1%, maximum drawdown of 50.8%, and standard deviation of 15.0%.

See the strategy descriptions, charts, and tables below or on the Strategies page.



Our Tactical Model provides trend direction and confidence levels for each of the 30+ asset classes and subclasses incorporated across the three strategies. Just three are positive of which one resides in the Balanced condition basket (our current Market Condition) and two live in the Hostile condition basket.

Bloomberg (March 23rd). Global bond markets have suffered unprecedented losses since peaking last year, as central banks including the Federal Reserve look to tighten policy to combat surging inflation.

The Bloomberg Global Aggregate Index, a benchmark for government and corporate debt total returns, has fallen 11% from a high in January 2021. That’s the biggest decline from a peak in data stretching back to 1990, surpassing a 10.8% drawdown during the financial crisis in 2008. It equates to a drop in the index market value of about $2.6 trillion, worse than about $2 trillion in 2008.

Adaptive Income posted a loss of  0.98% for January through March.

And how did Adaptive Income perform during the financial crisis in 2008? Adaptive Income recorded a positive CAGR of 6.15% with a maximum drawdown of 2.3% during the period October 2007 through March 2008.

“Sometimes there’s times to make money…sometimes there’s times not to lose money.” — David Tepper, founder of Appaloosa Management

I think that quote pretty well fits the positioning of the TAAStrategies during the past couple of months with historically high levels of cash. I expect there will be fresh opportunities soon enough.


From the April 1st Market Monitor

The big cap indexes which were little changed for the week are bullish and rising in the intermediate term and neutral and overbought in the short term suggesting higher prices following consolidation.

The big moves were in the Banking (-6.7%), Broker Dealer (-2.2%), and Housing (-1.5%) Indexes all of which are economic canaries showing signs of stress and falling momentum.

Cumulative Advancing Declining Volume was little changed for the week. With the S&P 500 having recovered 70%+- of its decline, it is hard to get excited with a slightly negative bias.

The Credit Markets Index got a boost this week from global declining spreads; although the yield trend remains bearish both domestically and globally.

The 10 year treasury yield was extremely overbought and pulled back a bit this week. My sense is that there is a good probability a high will be made between 2.8% and 3.0%. While the 2-10 Yield Curve has flattened, the flattening is due to the rise of 2 year yields, not the decline of 10 year yields.

The current watch list :

  • The Speculation Index is rising modestly in a slight shift to risk on
  • The Russell 2000 remains below resistance from where it broke down from an 11 month consolidation
  • Of the seven mega-cap leaders, one has turned up, several others are trying but they are not leading the market.
  • Value (risk off) continues to lead growth however growth did get a bid this week
  • Consumer Staples is vastly better bid than Discretionary which is risk off
  • Investor inflation expectations are extremely high but starting to reverse
  • Overall market breadth is giving up early signs of improvement
  • The VIX levels in the S&P 500, Russell 2000, and NASDAQ 100 are confirming the rally.
  • The MOVE Index, a measure of volatility in the Treasury market, is retreating from extreme levels but remains high enough to indicate liquidity issues remain

Three weeks ago I suggested that “The equity market may have bottomed given the slowing of downside momentum coupled with improving breadth.” I also suggested that downside risk remained high due to deteriorating conditions in the credit markets. While credit conditions show some improvement, they remain negative.

The S&P big and mid cap indexes have erased their downside targets in favor of new upside targets. The S&P 500 now targets 4718 and 4884. The current structure of the equity market suggests that the S&P 500 and NASDAQ 100 indexes may reach new highs while the remainder of the market lags. This is likely to signal the point where high inflation, rising rates, and rising energy costs create a noticeable drag on the markets.

Thank you for reading.

Earl Adamy

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