About Strategy
A simplified dual momentum system rotating between US Equities and Aggregate Bonds. Removes international stocks, focusing strictly on absolute momentum signals.
Performance Metrics (2016-2026)
| CAGR (10-Year) | 10.9% |
| Max Drawdown | -18.2% |
| Sharpe Ratio | 0.62 |
| Volatility (StdDev) | 13.8% |
| Best Year | +28.5% |
| Worst Year | -12.5% |
| Strategy Type | Tactical Asset Allocation |
| Risk Profile | Medium |
Asset Allocation
Dual Momentum rotates 100% of the portfolio between two assets: US Equities (VOO) when stocks are trending up, or Aggregate Bonds (AGG) when equity momentum turns negative. Unlike GEM, DM does not consider international equities — it's a pure US market timing strategy.
Execution Rules
- At month-end, calculate the trailing 12-month return of the S&P 500 (US equities).
- If the 12-month return exceeds the risk-free rate (T-Bills), invest 100% in US equities (VOO).
- If the 12-month return is below the risk-free rate, move 100% to aggregate bonds (AGG) as a defensive position.
ETF Proxies Used in Our Backtest
- Vanguard S&P 500 ETF (VOO) — for US equity momentum exposure
- iShares Core US Aggregate Bond ETF (AGG) — for defensive bond positioning
Allocation Calculator
Recommended Allocation
Enter performance inputs above to calculate weights.
History & Background of Dual Momentum
The Dual Momentum (DM) strategy is a streamlined variant of Gary Antonacci's Global Equity Momentum (GEM). While GEM uses both relative and absolute momentum across global markets, DM strips the system down to its simplest form — applying only absolute momentum (also called time-series momentum) to a single market: US equities.
The academic foundation for absolute momentum is extensive. Research by Moskowitz, Ooi, and Pedersen (2012) in their landmark paper "Time Series Momentum" demonstrated that assets with positive trailing returns tend to continue performing well, and vice versa. This effect has been documented across equities, bonds, commodities, and currencies over decades of data.
DM appeals to investors who believe that attempting to pick between US and international markets adds unnecessary complexity. By removing the relative momentum component, DM reduces the strategy to a single decision: "Is the S&P 500 in an uptrend or a downtrend?" This simplicity makes it one of the most accessible tactical strategies for individual investors.
When to Use Dual Momentum: Pros & Cons
Strengths
- Maximum simplicity — only 2 funds and 1 monthly decision
- Strong CAGR (10.9%) with meaningful bear market protection
- No need to track international markets or multiple indices
- Very low trading costs — maximum 12 trades per year
- Easy to implement in any brokerage account
Limitations
- Binary all-or-nothing allocation increases concentration risk
- Missing the relative momentum check means you can't switch to international markets when they outperform
- Whipsaw risk in sideways markets can erode returns
- Tax-inefficient for taxable accounts due to frequent switching
- Requires monthly discipline and emotional detachment
Ideal for: Investors who want GEM's concept but with even simpler execution, those who prefer US-only investing, and anyone using a tax-advantaged account (IRA/401k) who wants tactical protection with minimal complexity.