As per the Alpha Momentum Strategy, both the medium and long term trends of stocks here in the US are higher. As such, the portfolio will remain 100% invested, and will reflect the following composition as of close of trade tomorrow:
The performance of the strategy since website inception is as follows.
The model is underperforming US equities, but periods of underperformance will occur and this isn’t something to fret over. The cost of significant outperformance over the long term is that sometimes we must endure (sometimes significant) underperformance in the short term.
Inability to endure periods of underperformance in fundamentally sound strategies is one of the reasons that dollar-weighted returns in the mutual fund industry are so bad. Investors herd into strategies after a couple years of relative outperformance. The pendulum swings the other way, and investors have a hard time sticking with the strategy during the underperforming times. No strategy can outperform at all times.
We wrote an extended piece on tough (relative) times just over a year ago; you can read it HERE.
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