GEM Strategy Q3 2026 Performance Review

The Global Equity Momentum (GEM) strategy continues to be a benchmark for tactical trend-following. In this post, we review the GEM strategy results for 2026, analyzing how its absolute and relative momentum filters navigated the macroeconomic landscape, interest rate shifts, and global equity rotations.

Navigating Volatility

2026 presented unique challenges with shifting inflation data and central bank policy divergences. GEM's reliance on a 12-month lookback period meant that it avoided short-term whipsaws, maintaining exposure to the dominant equity trends. When US tech dominance showed signs of fatigue, the relative momentum filter proved crucial in capturing international outperformance.

Absolute Momentum in Action

During brief periods of global market correction, the absolute momentum filter (comparing equity returns against the risk-free rate) was tested. Because the T-Bill yield remained a competitive benchmark, the threshold for equities to remain invested was historically high. GEM successfully rotated to aggregate bonds when global equities failed to beat cash, protecting capital.

Final Performance Metrics

For the trailing 12 months up to Q3 2026, GEM demonstrated remarkable resilience. By systematically rotating allocations based on its dual momentum filters, the strategy achieved strong risk-adjusted returns with drawdowns significantly shallower than passive buy-and-hold benchmarks.

Does GEM Still Work?

Yes. While the "whipsaw" events of the 2020s have frustrated some trend followers, the core mathematical premise of momentum remains intact. By avoiding catastrophic -50% drawdowns (like those seen in 2001 and 2008), GEM mathematically requires much smaller subsequent returns to achieve new equity highs. For investors seeking a quantitative, emotion-free way to navigate both bull and bear markets, GEM remains a top-tier tactical strategy.