If this still highly valued market goes risk-on again, I'm not going to use a binary all-in, all-out monthly strategy like GEM or even the SPY-COMP family any longer. I'm not going to post the GEM signals any longer. If we go risk-on again before we have a good cleansing bear market, I'm going to go back in with Paul Novell's version of Generalized Protective Momentum (GPM). The original GPM is described here, with free signals at the bottom of the post. Paul's isn't much different. It just spends more time in risk assets through the use of SPY-COMP for risk control as an overlay to the original GPM.
GPM still trades once a month but with important differences from all-in, all-out approaches:
1. the investible universe includes equities, bonds, gold, commodities, so when it's "risk on" it could still be allocating to safe havens
2. the momentum lookbacks are 1, 3, 6, and 12 month. The 1 month contribution makes it more fast-acting than GEM
3. The GPM maximum drawdown is -7.3%, the CAGR is 10.7%, Sharpe ratio is 0.96 for me that's nice. Fits my risk profile
4. the risk-on comes in steps, not all-in, all-out. As conditions get better or worse, the allocation steps the risk up or down
It does trade a lot, like 36 trades a year. The position sizes change each month as the risk size changes. So it's a pain to manage across several accounts. I built the spreadsheets needed to do this over the weekend.
Reason for doing this? Not wanting to miss out on a possible melt-up bubble due to stimulus, still want to trade monthly, but want a strategy with low drawdown and "good enough" returns, and it will tie itself off "fast enough" in stages to stop the bleeding when risk comes back with that 1 month lookback contribution.
But if we have that significant bear market, and valuations are back to historical norms, then I think it's OK to go back to what I was doing. As much intervention as the Fed is applying? Who knows when that might be, if ever.