January Update For The Global Asset Allocation Strategy

January Update For The Global Asset Allocation Strategy

Below is the January allocation for the Global Asset Allocation Strategy.

january asset allocation 2014


And here is how the Strategy performed in December:

global asset allocation strategy

Model testing and research done with ETFreplay

Strategy Rules:

The rules for the model are to examine a prescreened global ETF universe to find the top ten ETFs with the highest relative strength. Those 10 ETFs are then allocated equal weight within a portfolio, then overlayed with the 10 month moving average.

ETF Universe: etf global asset allocation

If the ETF is trading below the 10 month moving average, it is replaced with iShares Barclays 20+ Yr Treasury Bond ETF (“TLT”).

This model underperformed the S&P 500 index in 2013, but I am curious as to how it will perform in 2014.

What Is A Global Asset Allocation Strategy?

A global asset allocation strategy attempts to take advantage of relative strength and momentum within global markets. Typically asset classes are used via ETFs or mutual funds instead of individual securities, as the latter may have higher overall transaction costs.

Since most of these strategies focus on quantitative methodologies, they tend to have shorter holding periods when compared with a portfolio holding individual equities. As a result, positions are typically held less than a year and can rotate between various asset classes such as equities, fixed income, currency, etc.

The objective is to provide investors with the opportunity to invest in economies around the world — both major and emerging — while providing a risk-based approach in order to reduce exposure to volatile economies during uncertain times.


Last Thoughts:

US equities, to me, seem a bit overvalued in an era of Fed tapering. As 2014 progresses we may start to see an exodus of capital into overseas markets such as Europe – specifically Germany.


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