Alpha Momentum Portfolio - October 2019 - First Rebalance

As per the Alpha Momentum Strategy, trend signals in US equities are up. As such, the model portfolio will remain fully invested. We will make changes to the model portfolio to reflect the following composition as of close tomorrow.


It has been a very tough year for the strategy, no doubt! We wrote about the prospects for periods of serious underperformance back when we first launched the blog, and now we get to witness it in real time.

The current 12-month rolling underperformance of the strategy vs the benchmark (S&P 500) sits at about -19%. While it is painful, its not unprecedented. We see similar periods of underperformance in the historical record in the early 1990s and again in 2012.

So while we shouldn’t expect underperformance of this severity on a regular basis, it is not without precedence and it would be foolish to abandon the strategy because of it.

This is an unfortunate reality of following a strategy with significant tracking error (deviation in performance relative to a benchmark), which is necessary if one wishes to outperform long term.

Thanks for following along.