Dynamic Sector Strength Strategy

This aggressive global momentum investment strategy is designed to invest the majority of funds domestically in U.S. based investments including the S&P 500 index, and NASDAQ 100 index (QQQ) heavily weighted in U.S. based technology companies, or internationally in either developed foreign markets, and emerging markets.  Up to 85% of funds can be invested in the index with the strongest recent performance.
In addition, up to 15% of funds can be invested in a less diversified sector index (described below), when that sector is performing strongly.
The strategy will switch to the safety of government bonds or cash when performance of U.S or foreign markets turns down.
The chart below is the back-tested performance of the Global Dynamic Sector Strength Strategy since 1994 (approx 25 years) compared to the Vanguard Balanced Fund (VBINX) which holds 60% stocks and 40% bonds.


How does the strategy work?

The Global Dynamic Sector Strength Strategy invests the majority of its holdings in one or two of the indexes below that have the strongest recent performance.  The strategy will recommend from 60% to 85% of funds be held in the strongest performing index, and up to 30% of funds in the second strongest performing index.

  • S&P 500 index.
  • NASDAQ 100 index heavily weighted in technology sector.
  • MCSI EAFE (Europe, Australasia and Far East) Developed Markets index.
  • Emerging Markets index.

In addition to these indexes, the strategy also monitors a variety of sectors in the global investment world and will recommend up to 15% of funds be held in one of these sectors when the sector is out-performing the broader indexes above.  The sectors include specific industries of the U.S. economy, as well as different country-specific funds.

Like all of our strategies, this strategy is designed to move from risky assets (stock indexes) to safety assets (bond indexes) when the broader indexes show weakness in recent performance.  The intermediate-term government bond index (IEF) is used as a source of safety funds.  When performance of IEF is negative, the strategy will recommend cash be held to limit losses to the portfolio.

Asset classHoldingDescription
U.S. Large CapSPYSPDR S&P 500 ETF Trust
Developed Foreign MarketsEFAiShares MSCI EAFE Index Fund
Emerging MarketsEEMSPDR S&P 500 ETF Trust
U.S. TechnologyQQQPowerShares QQQ Trust
Government BondsIEFiShares Barclays 7-10 Year Treasury Bond Fund
CashCashCash held as United States dollars.

Strategy Metrics

MetricStrategyBalanced portfolio
Annual Return (20 years)9.2%6.7%
Sharpe Ratio (20 years)0.710.68
Max Drawdown-19.7%-32.6%
Drawdown Start / End datesAugust 2021 to July 2024October 2007 to December 2010
Max Drawdown length35 months38 months

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Historical holdings


Country / SectorSector HoldingDescription
SingaporeEWSiShares MSCI Singapore Capped ETF
South KoreaEWYiShares MSCI South Korea Capped ETF
BrazilEWZiShares MSCI Brazil Capped ETF
InternetFDNFirst Trust Dow Jones Internet ETF
China Large-CapFXIiShares China Large-Cap ETF
Gold MinersGDXVanEck Vectors Gold Miners ETF
BiotechnologyIBBiShares Nasdaq Biotechnology ETF
China InternetKWEBKraneShares CSI China Internet ETF
RussiaRSXVanEck Vectors Russia ETF
Social MediaSOCLGlobal X Social Media ETF
SemiconductorsSOXXiShares PHLX Semiconductor ETF
EnergyXLEEnergy Select Sector SPDR ETF
FinancialXLFFinancial Select Sector SPDR ETF
Consumer DiscretionaryXLYConsumer Discret Sel Sect SPDR ETF