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:- Compared with the benchmark DIA (41%) in the period of the last 5 years, the total return, or increase in value of 93.1% of US Market Strategy is larger, thus better.
- Looking at total return, or increase in value in of 30.6% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to DIA (32.7%).

'The compound annual growth rate isn't a true return rate, but rather a representational figure. It is essentially a number that describes the rate at which an investment would have grown if it had grown the same rate every year and the profits were reinvested at the end of each year. In reality, this sort of performance is unlikely. However, CAGR can be used to smooth returns so that they may be more easily understood when compared to alternative investments.'

Which means for our asset as example:- The compounded annual growth rate (CAGR) over 5 years of US Market Strategy is 14.1%, which is greater, thus better compared to the benchmark DIA (7.1%) in the same period.
- Looking at annual return (CAGR) in of 9.3% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to DIA (9.9%).

'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.'

Using this definition on our asset we see for example:- Looking at the volatility of 9% in the last 5 years of US Market Strategy, we see it is relatively lower, thus better in comparison to the benchmark DIA (21.3%)
- During the last 3 years, the historical 30 days volatility is 7.5%, which is lower, thus better than the value of 15.5% from the benchmark.

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Using this definition on our asset we see for example:- Compared with the benchmark DIA (15.4%) in the period of the last 5 years, the downside deviation of 6.3% of US Market Strategy is lower, thus better.
- Looking at downside volatility in of 5.2% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to DIA (10.8%).

'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.'

Which means for our asset as example:- The risk / return profile (Sharpe) over 5 years of US Market Strategy is 1.29, which is greater, thus better compared to the benchmark DIA (0.22) in the same period.
- Looking at Sharpe Ratio in of 0.91 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to DIA (0.48).

'The Sortino ratio measures the risk-adjusted return of an investment asset, portfolio, or strategy. It is a modification of the Sharpe ratio but penalizes only those returns falling below a user-specified target or required rate of return, while the Sharpe ratio penalizes both upside and downside volatility equally. Though both ratios measure an investment's risk-adjusted return, they do so in significantly different ways that will frequently lead to differing conclusions as to the true nature of the investment's return-generating efficiency. The Sortino ratio is used as a way to compare the risk-adjusted performance of programs with differing risk and return profiles. In general, risk-adjusted returns seek to normalize the risk across programs and then see which has the higher return unit per risk.'

Which means for our asset as example:- Looking at the excess return divided by the downside deviation of 1.84 in the last 5 years of US Market Strategy, we see it is relatively larger, thus better in comparison to the benchmark DIA (0.3)
- During the last 3 years, the downside risk / excess return profile is 1.32, which is higher, thus better than the value of 0.69 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:- Looking at the Ulcer Ratio of 2.83 in the last 5 years of US Market Strategy, we see it is relatively lower, thus better in comparison to the benchmark DIA (7.94 )
- Compared with DIA (6.97 ) in the period of the last 3 years, the Ulcer Index of 2.95 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.'

Using this definition on our asset we see for example:- The maximum drop from peak to valley over 5 years of US Market Strategy is -13.1 days, which is larger, thus better compared to the benchmark DIA (-36.7 days) in the same period.
- During the last 3 years, the maximum reduction from previous high is -9.2 days, which is larger, thus better than the value of -20.8 days from the benchmark.

'The Maximum Drawdown Duration is an extension of the Maximum Drawdown. However, this metric does not explain the drawdown in dollars or percentages, rather in days, weeks, or months. It is the length of time the account was in the Max Drawdown. A Max Drawdown measures a retrenchment from when an equity curve reaches a new high. It’s the maximum an account lost during that retrenchment. This method is applied because a valley can’t be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the bottom of the largest trough is recorded.'

Which means for our asset as example:- The maximum time in days below previous high water mark over 5 years of US Market Strategy is 261 days, which is lower, thus better compared to the benchmark DIA (430 days) in the same period.
- Compared with DIA (430 days) in the period of the last 3 years, the maximum days under water of 261 days is lower, 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.'

Which means for our asset as example:- Compared with the benchmark DIA (109 days) in the period of the last 5 years, the average time in days below previous high water mark of 50 days of US Market Strategy is lower, thus better.
- Compared with DIA (139 days) in the period of the last 3 years, the average time in days below previous high water mark of 66 days is lower, thus better.

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.