Monthly Momentum In SPY and TLT (Rotation Strategy)

Last Updated on April 5, 2021 by Oddmund Groette

Some days ago I published an article that rotates between SPY, TLT, and EEM based on monthly momentum.

Let’s test how this strategy performs when rotating between SPY and TLT:

  • It’s based on monthly quotes in the ETFs SPY and TLT.
  • Every month rank both based on last month’s performance.
  • Go long the one with the best performance the prior month.
  • Hold for one month and repeat (or continue being long the same instrument).

This is all there is to it. Obviously, this strategy is best performed in a tax-deferred account, but without slippage and taxes the equity curves look like this:

Monthly switching between SPY and TLT.

The strategy outperforms buy and hold for both ETFs, but perhaps more importantly has a lower drawdown.

Is this strategy likely to perform just as good in the future? I don’t know. Interest rates have been going down and is now close to zero. But the beauty of this strategy is that is has performed well both during the financial crisis in 2008/09 and currently in 2020 during Covid-19 (at least so far).


Disclosure: I am not a financial advisor. Please do your own due diligence and investment research or consult a financial professional. All articles are my opinion – they are not suggestions to buy or sell any securities.