Performance & Risk Metrics (2016-2026)
| Metric | GEM | Dual Momentum (DM) |
|---|---|---|
| CAGR (10-Year) | 12.3% | 10.9% |
| Max Drawdown | -17.8% | -18.2% |
| Sharpe Ratio | 0.72 | 0.62 |
| Volatility (StdDev) | 12.5% | 13.8% |
| Best Calendar Year | +31.2% | +28.5% |
| Worst Calendar Year | -11.2% | -12.5% |
| Asset Universe | US Equities, Int'l Equities, Bonds | US Equities, Bonds only |
| Rebalancing | Monthly (momentum signals) | Monthly (momentum signals) |
GEM — The Global Approach
Gary Antonacci's original GEM system uses a two-step momentum filter. First, relative momentum compares US equities (S&P 500) against international equities (MSCI ACWI ex-US), selecting the leader. Then, absolute momentum compares the winner against risk-free T-Bills — if stocks lag cash, the portfolio rotates entirely to bonds. This international diversification layer gives GEM access to global equity returns when non-US markets outperform.
DM — The Simplified System
Dual Momentum (DM) strips out the international equity component entirely. It only asks one question: is the S&P 500's trailing 12-month return greater than cash? If yes, invest 100% in US stocks. If no, rotate 100% to aggregate bonds. This simplification reduces the strategy to a single binary signal, making it easier to execute but sacrificing the diversification benefit of international markets.
Key Differences Explained
The 1.4% CAGR advantage GEM holds over DM in our 2016–2026 backtest comes primarily from periods when international equities outperformed the US market. During stretches of dollar weakness and strong ex-US equity performance within this window, GEM captured returns that DM missed by staying US-only. Historically (outside our backtest window), this effect was even more pronounced — for example during the 2003–2007 emerging market boom.
- Diversification: GEM holds a structural advantage by accessing the full global equity opportunity set. When US stocks underperform (as they did for most of 2000–2010), GEM can rotate to stronger international markets. DM is trapped in a US-or-bonds binary.
- Complexity: DM requires tracking only one asset's momentum (S&P 500 vs cash). GEM requires tracking three data points (US, International, Cash) and comparing them. Both are simple by any quantitative standard, but DM is the absolute minimum complexity system.
- Tax Efficiency: Both strategies have identical turnover profiles — they rebalance monthly. There is no tax advantage to either system. Both are best implemented in tax-advantaged accounts.
- Whipsaw Risk: Both systems are equally vulnerable to whipsaw signals in sideways markets, since they use the same 12-month lookback period for momentum measurement.
Side-by-Side Pros and Cons
GEM Strengths & Limits
- Higher historical CAGR (12.3% vs 10.9%).
- Better Sharpe ratio — more return per unit of risk.
- Access to international equity upside when ex-US outperforms.
- Slightly more complex execution (3 assets to track).
- Requires an international ETF (VXUS) in addition to VOO and BND.
DM Strengths & Limits
- Simplest possible momentum system — single binary signal.
- Only requires two ETFs (VOO and AGG/BND).
- Easier to automate and follow with zero ambiguity.
- Misses international equity rallies entirely.
- Lower long-term CAGR due to reduced diversification.
Deep Dive
Want to master this strategy? Read our definitive Global Equity Momentum (GEM) Guide to understand the core rules, historical performance, and exact ETF implementations.
Which Strategy is Right For You?
Choose GEM if: You want the highest expected returns from a momentum system and don't mind tracking one extra asset. GEM is the "full version" of dual momentum investing and is recommended by Gary Antonacci himself.
Choose DM if: You prioritize absolute simplicity over marginal return gains. If you invest only in the US market and want the easiest possible trend-following system with only two ETFs, DM delivers solid risk-adjusted returns with minimal effort.