Global Equity Momentum (GEM) is one of the most celebrated and thoroughly researched quantitative models in existence. Developed by Gary Antonacci in his award-winning 2014 book Dual Momentum Investing, this strategy offers a simple yet incredibly powerful method for capturing market upside while severely limiting drawdowns during bear markets.
GEM Strategy in 60 Seconds
| Developer | Gary Antonacci |
| Type | Tactical Asset Allocation (Trend Following) |
| Rebalancing Frequency | Monthly (Last trading day) |
| Number of Assets Held | 1 (Winner takes all) |
| Lookback Period | 12 Months |
| Investable Universe | US Equities, Int'l Equities, US Aggregate Bonds, Cash |
What is Dual Momentum?
Antonacci's breakthrough was combining two distinct forms of momentum into a single, unified framework:
- Relative Momentum: Compares two or more assets to see which has performed better. In GEM, we compare US Equities (S&P 500) and International Equities (MSCI ACWI ex-US) over the trailing 12 months, and allocate to the winner. This captures the geographic cycles of equity leadership.
- Absolute Momentum (Trend Following): Compares the leading asset against a risk-free rate (cash/T-bills). If the winning equity index hasn't outperformed cash over the trailing 12 months, absolute momentum is negative. This triggers a safety filter, shifting 100% of the portfolio into Aggregate Bonds.
"Dual momentum is the clean integration of relative strength momentum and trend following absolute momentum. They complement each other perfectly." — Gary Antonacci
The GEM Execution Rules
GEM is rebalanced exactly once per month. At the end of each month, the investor carries out the following steps:
- Calculate the trailing 12-month return of S&P 500 (representing US stocks) and MSCI ACWI ex-US (representing global stocks).
- Select the index with the higher return.
- Compare the return of this winning index to the trailing 12-month return of 1-3 Month Treasury Bills (cash proxy).
- If the winning equity return is greater than cash, invest 100% in that equity index. Otherwise, invest 100% in a broad U.S. Aggregate Bond index (like BND or AGG).
Why GEM Works
Historically, equities spend about 70-80% of the time in bull markets. Relative momentum keeps the investor aligned with the strongest equity markets (whether that's US tech stocks or international value plays). However, when severe bear markets emerge (such as the 2008 financial crisis or the 2000 dot-com crash), absolute momentum acts as a circuit breaker, moving the entire portfolio into high-quality bonds. This reduces drawdown risk and protects capital.
ETF Implementations
A typical retail investor can implement GEM using just three low-cost, liquid ETFs:
- US Stocks: Vanguard S&P 500 ETF (VOO) or iShares Core S&P 500 UCITS ETF (CSPX)
- International Stocks: Vanguard Total International Stock ETF (VXUS) or iShares Core MSCI World ex-US
- Aggregate Bonds: Vanguard Total Bond Market ETF (BND) or iShares Core Global Aggregate Bond UCITS ETF (AGGH)
Frequently Asked Questions (FAQ)
How do I calculate GEM signals manually?
To calculate GEM signals: Record the NAV of your 3 ETFs on the last trading day of the month. Calculate the 12-month Total Return (including dividends). Compare US vs International return and select the winner. Then compare the winner's return against the 12-month T-Bill yield. If the equity winner beats T-Bills, buy it. If it doesn't, buy Aggregate Bonds. StrategyIndex.io's Signals Dashboard calculates this automatically.
What broker should I use for the GEM strategy?
For European GEM investors, Interactive Brokers is highly recommended due to low commissions and wide access to UCITS ETFs. Other good options include Trading 212 and DeGiro. The key is low trading fees since you might rebalance several times a year.
What are the biggest mistakes when following GEM?
Common mistakes include checking signals mid-month (GEM is strictly end-of-month), letting emotions override the systematic signal, ignoring total return (using price-only data), and not accounting for capital gains taxes if trading in a taxable account.
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