The U.S. Market Strategy was designed as an alternative to our Universal Investment Strategy which allocates between SPY (S&P 500 ETF) and TLT (U.S. Treasuries ETF). The equity component of this new strategy switches between SPY (S&P500), QQQ (Nasdaq 100), DIA (Dow 30) and SPLV (S&P 500 low volatility) so it can take advantage of different market conditions. The addition of SPLV provides a good defensive option in times of high market volatility.

In addition to U.S. equities, the strategy utilizes a hedge strategy that switches between TLT, TIP, UUP and GLD.

The strategy's backtests performed substantially better than a simple SPY-TLT investment. All of the component ETFs are very liquid with small spreads making them easy to trade with negligible costs.

'Total return, when measuring performance, is the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time. Total return accounts for two categories of return: income including interest paid by fixed-income investments, distributions or dividends and capital appreciation, representing the change in the market price of an asset.'

Using this definition on our asset we see for example:- The total return over 5 years of US Market Strategy is 119.6%, which is greater, thus better compared to the benchmark DIA (92.4%) in the same period.
- Looking at total return, or performance in of 53.5% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to DIA (31.1%).

'The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.'

Which means for our asset as example:- Compared with the benchmark DIA (14%) in the period of the last 5 years, the annual performance (CAGR) of 17% of US Market Strategy is greater, thus better.
- Compared with DIA (9.4%) in the period of the last 3 years, the annual return (CAGR) of 15.4% is higher, thus better.

'In finance, volatility (symbol σ) is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option). Commonly, the higher the volatility, the riskier the security.'

Which means for our asset as example:- Looking at the historical 30 days volatility of 8.9% in the last 5 years of US Market Strategy, we see it is relatively lower, thus better in comparison to the benchmark DIA (19.9%)
- Looking at volatility in of 10.4% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to DIA (24.2%).

'Risk measures typically quantify the downside risk, whereas the standard deviation (an example of a deviation risk measure) measures both the upside and downside risk. Specifically, downside risk in our definition is the semi-deviation, that is the standard deviation of all negative returns.'

Which means for our asset as example:- Looking at the downside volatility of 6.1% in the last 5 years of US Market Strategy, we see it is relatively lower, thus better in comparison to the benchmark DIA (14.5%)
- Looking at downside volatility in of 7.4% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to DIA (17.7%).

'The Sharpe ratio is the measure of risk-adjusted return of a financial portfolio. Sharpe ratio is a measure of excess portfolio return over the risk-free rate relative to its standard deviation. Normally, the 90-day Treasury bill rate is taken as the proxy for risk-free rate. A portfolio with a higher Sharpe ratio is considered superior relative to its peers. The measure was named after William F Sharpe, a Nobel laureate and professor of finance, emeritus at Stanford University.'

Using this definition on our asset we see for example:- Compared with the benchmark DIA (0.58) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 1.64 of US Market Strategy is greater, thus better.
- During the last 3 years, the ratio of return and volatility (Sharpe) is 1.24, which is higher, thus better than the value of 0.29 from the benchmark.

'The Sortino ratio, a variation of the Sharpe ratio only factors in the downside, or negative volatility, rather than the total volatility used in calculating the Sharpe ratio. The theory behind the Sortino variation is that upside volatility is a plus for the investment, and it, therefore, should not be included in the risk calculation. Therefore, the Sortino ratio takes upside volatility out of the equation and uses only the downside standard deviation in its calculation instead of the total standard deviation that is used in calculating the Sharpe ratio.'

Which means for our asset as example:- The ratio of annual return and downside deviation over 5 years of US Market Strategy is 2.36, which is higher, thus better compared to the benchmark DIA (0.79) in the same period.
- During the last 3 years, the ratio of annual return and downside deviation is 1.75, which is higher, thus better than the value of 0.39 from the benchmark.

'The Ulcer Index is a technical indicator that measures downside risk, in terms of both the depth and duration of price declines. The index increases in value as the price moves farther away from a recent high and falls as the price rises to new highs. The indicator is usually calculated over a 14-day period, with the Ulcer Index showing the percentage drawdown a trader can expect from the high over that period. The greater the value of the Ulcer Index, the longer it takes for a stock to get back to the former high.'

Applying this definition to our asset in some examples:- The Downside risk index over 5 years of US Market Strategy is 1.8 , which is lower, thus better compared to the benchmark DIA (6.45 ) in the same period.
- Compared with DIA (8.01 ) in the period of the last 3 years, the Downside risk index of 2.19 is lower, thus better.

'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'

Which means for our asset as example:- The maximum drop from peak to valley over 5 years of US Market Strategy is -15.3 days, which is greater, thus better compared to the benchmark DIA (-36.7 days) in the same period.
- Compared with DIA (-36.7 days) in the period of the last 3 years, the maximum drop from peak to valley of -15.3 days is larger, thus better.

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Max Drawdown Duration is the worst (the maximum/longest) amount of time an investment has seen between peaks (equity highs). Many assume Max DD Duration is the length of time between new highs during which the Max DD (magnitude) occurred. But that isn’t always the case. The Max DD duration is the longest time between peaks, period. So it could be the time when the program also had its biggest peak to valley loss (and usually is, because the program needs a long time to recover from the largest loss), but it doesn’t have to be'

Which means for our asset as example:- Looking at the maximum time in days below previous high water mark of 70 days in the last 5 years of US Market Strategy, we see it is relatively lower, thus better in comparison to the benchmark DIA (161 days)
- Compared with DIA (161 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 66 days is smaller, thus better.

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Avg Drawdown Duration is the average amount of time an investment has seen between peaks (equity highs), or in other terms the average of time under water of all drawdowns. So in contrast to the Maximum duration it does not measure only one drawdown event but calculates the average of all.'

Using this definition on our asset we see for example:- The average days below previous high over 5 years of US Market Strategy is 15 days, which is lower, thus better compared to the benchmark DIA (45 days) in the same period.
- Looking at average days under water in of 16 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to DIA (58 days).

Historical returns have been extended using synthetic data.
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- Note that yearly returns do not equal the sum of monthly returns due to compounding.
- Performance results of US Market Strategy are hypothetical, do not account for slippage, fees or taxes, and are based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.