Market recap, open positions, new signals, and performance of six trading strategies. Tactical asset allocation, mean reversion, cross-sectional momentum, and equity long-short with weekly and monthly updating. Access the full report with a Market Signals or All-in-One subscription.
Contents
1. Performance of the Ensemble and Benchmarks
2. Recap and Comments
3. Positions and Performance of Strategies
4. Signal Summary for Next Week
1. Performance of the ensemble and benchmarks
Weekly return of the ensemble: -1%
This week, the equity of the equally weighted strategy ensemble fell 1%.
Year-to-date performance (Backtest, no leverage)
| YTD Return | YTD Maximum Drawdown | Weekly Change | |
| Strategy ensemble | +14.8% | -2.5% | -1.0% |
| Invesco RSP ETF | +16.8% | -5.6% | -1.6% |
| SPDR SPY ETF | +28.3% | -5.4% | -0.6% |
On a risk-adjusted basis, the ensemble outperforms both the SPY ETF and its equal-weight counterpart, the RSP ETF. At 2x leverage, the strategy ensemble outperforms the S&P 500 total return this year on both an absolute and risk-adjusted basis.
2. Recap and Comments (December 9–December 13, 2024)
This was a difficult week for systematic trading due to deteriorating breadth in the stock market and rising uncertainty. It could have gotten worse, but Dow-30 long-short provided a small convexity this week with a gain of 0.7%. Despite suffering a 2.6% weekly loss, Dow-30 mean-reversion remains the top-performing strategy with a 26.3% return year-to-date.
Regarding the Santa Rally in stocks, our analysis indicates that it has been more of an expectation or wish than a legitimate seasonal anomaly. See this article for more details. Some doubts about massive reforms are surfacing, and the uncertainty may lead to increased volatility and further deterioration in stock market breadth. Simultaneously, the desire to sustain equity valuations appears to drive monetary policy, disregarding its potential impact on inflation. After realizing this, the bond market fell this week and erased three weeks of gains.
As we near a potential change in administration, psychosis levels are increasing due to the potential for a “wealth redistribution.” Social media has witnessed the emergence of conspiracy theories, prompting rational investors to limit their exposure until the situation stabilizes. We cannot make any forecasts, and we have long surrendered this intellectual activity to those who have abilities to predict the future. We hope the strategy ensemble will generate reasonable risk-adjusted returns and help us navigate changing market regimes, no matter what their drivers are.
3. Positions and strategy performance: Friday, December 13, 2024
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Charting and backtesting program: Amibroker. Data provider: Norgate Data
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