The following chart plots the performance of the Asbury Research Trend Model for the US stock market, which uses the S&P 500 as a proxy, beginning in 2007 and updated through September 2014.
It shows that our model has accumulated 1096 points since January 2007 versus 547 points for the S&P 500. In percentage terms, the Asbury Research Trend Model has produced a 77% return during this period versus a 38% return for the S&P 500.
Asbury Research Trend Model: S&P 500, 2007-2014
This is provided for information purposes only. Past performance or back-tested results may not necessarily indicate future results. The performance indicated from back-testing or historical track record may not be typical of future performance. No inferences may be made and no guarantees of profitability are being stated by Asbury Research LLC. The risk of loss trading in financial assets can be substantial. Therefore, you should therefore carefully consider whether such trading is suitable for you in light of your financial condition.
US Stock Market Trend Model: Key Features & Objectives
- The model utilizes 3 quantitative inputs that measure market internals, price momentum, and trend velocity, and includes a price-based metric for risk aversion.
- This is a long-only model that uses the S&P 500 as a proxy for the market. It is either long or neutral: no short positions, leveraged longs, or hedging via derivatives.
- It was built with the objectives of: 1) buying on weakness, 2) being in the market as much as possible, 3) exiting on meaningful declines, and 4) quickly re-entering the market as soon as there is evidence that a bullish trend has re-emerged.
- Since 2007, the model has averaged 4.6 signals per year or approximately 1 per quarter.
Since 2007, Our Model Has:
- slightly underperformed the S&P 500 in exceptional years like 2009 and 2013,
- modestly outperformed during average years like 2007, 2010, and 2012 and,
- most important, significantly outperformed and/or avoided losses during poor years like 2008 and 2011.
Attempting to get out of the way of an emerging market decline comes with the inherent risk of potentially missing out on some performance — especially during exceptional years which we would define as a 15% or greater annual rise in the S&P 500. Diminished hedge fund returns since 2013 are evidence of this.
However, if you look back over a bigger span of time, our model’s performance since 2007 is a testament to intelligent quantitative risk management as it has more than doubled the S&P 500′s performance during that period without using leverage or short positions. We view this as proof that, over time, during a period that includes all market environments including bullish, bearish, and neutral price trends, a conservative and repeatable quantitative approach can significantly and consistently trump passive buy and hold.
Our trend model is just one of dozens of different metrics and data series that we utilize to produce a comprehensive market analysis, one that we believe is collectively more insightful and forward-looking than any of its individual components.
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