Feb 01, 2015 Update: Thanks to a reader, a couple of typos have been corrected in the GMR returns.
It's time to see what worked and what didn't for 2014, in order to adjust going forward. The disappointing news is that most of the ETF rotation strategies I follow, greatly underperformed, if compared to just holding the US stock market (SPY) or utilizing the "KISS Low Volatility Rotation" strategy, which basically had you invested in SPY for the entire year. The only rotation strategy that narrowly beat the market was "Simple Pair Switching".
Of the other strategies, "Buy the Dips" worked well throughout the year and so did "Hedged Convexity Capture".
Benchmark (SPY): +12%
KISS Low Volatility Rotation: +12%
Global Market Rotation: +3%
Global Transportation with Commodities Rotation: +5%
Simple GMR: +4%
Simple Pair Switching: +13%
A bit disappointing for the rotation strategies that backtested to beat the market every year.
A good lesson for the new year to stay diversified with various strategies and good reminder that
even with rigorous backtesting, past performance doesn't necessarily indicate future performance.
Below is the breakdown of the signals, returns and cumulative returns for the rotation strategies for 2014.
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