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2020issue C0118-21

Evaluating a two-window seasonal equity-bond switch

The archive treats a calendar split as one seasonal rotation: a mid-cap sleeve in the November-May window, an intermediate Treasury sleeve in the June-October window, and a score built from seasonal windows plus complete bull and bear cycles.

  • The tested seasonal rotation holds a mid-cap sleeve from November 1 through May 31 and an intermediate Treasury sleeve from June 1 through October 31.
  • A long-run US equity price series treated the June-October window as weak on a multi-decade cumulative basis, while year-to-year results in that window were irregular and included multi-year gain stretches in every decade of the sample.
  • Reported outcomes were a hypothetical month-end test of index total returns with no fees deducted, and the mid-cap sleeve was used as a growth-oriented holding between smaller and larger companies.
  • Complete bull-to-bull and bear-to-bear cycles were presented as the preferred way to score this mechanical long-horizon rule against a buy-and-hold large-capitalization equity benchmark.
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Current trackMarket regime classification91 readingsSeasonal analysis93 readingsSeasonal trading130 readings

The seasonal split

A long-run US equity price series was split into a November-May window and a June-October window to compare seasonal market behavior.

The June-October window was described as weak on a multi-decade cumulative basis. Year-to-year results in that window were treated as irregular, including multi-year gain stretches inside every decade of the sample.

A locked two-sleeve rotation

The tested procedure is one seasonal rotation. It holds a mid-cap sleeve, a mid-capitalization equity index, from November 1 through May 31, and an intermediate Treasury sleeve, a three- to seven-year Treasury total-return series, from June 1 through October 31.

The mid-cap sleeve was justified as a growth-oriented holding sitting between smaller and larger companies for the November-May window. The mid-capitalization series used in the combined-window test begins later than the long-run seasonal split.

Reported outcomes were a hypothetical month-end test. They used month-end index total returns with no fees deducted and no live execution.

Scoring the rule

The combined-window test compared the seasonal equity-bond rotation with a buy-and-hold large-capitalization equity index. The evaluation table compared average results in each seasonal window, twelve-month and five-year lookbacks, and the frequency of positive multi-year periods.

Complete bull-to-bull and bear-to-bear cycles were presented as the preferred way to score a mechanical long-horizon rule set against a benchmark. Cycle-window evaluation split results from successive bull-market highs and from successive bear-market lows.

The tables noted that the latest bear-to-bear window still lacked a terminal low.

Two-window switch versus S&P 500 across complete bull and bear cycles

The locked November–May mid-cap and June–October Treasury rotation beat buy-and-hold in every bull-high-to-bull-high window and in three of four bear-low-to-bear-low windows; the S&P 500 leads only in the unfinished stretch after February 2009. Bar heights are the article’s tabulated cycle returns, not values read off an equity curve.
The locked November–May mid-cap and June–October Treasury rotation beat buy-and-hold in every bull-high-to-bull-high window and in three of four bear-low-to-bear-low windows; the S&P 500 leads only in the unfinished stretch after February 2009. Bar heights are the article’s tabulated cycle returns, not values read off an equity curve.S&P MidCap 400 and U.S. intermediate Treasuries versus S&P 500 · August 1982 through July 2019 · 1982-08-01T00:00:00.000Z to 2019-07-31T00:00:00.000Z

Hypothetical month-end index total returns with no fees. The February 2009–July 2019 bear-to-bear window is incomplete until the next bear-market low.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
20 of 21 in the Market regime classification track
202036-39 pp.Next on Market regime classificationDating energy regime breaks before the tradeMarket-regime-classification asks whether the tape still matches an incumbent commodity-energy complex versus a falling-cost challenger complex on a weeks-to-months horizon.
All readings on this track · 21 readings
  1. 1991A commodity-bond regime check before an equity relative strength index
  2. 1993A case study in refusing an isolated entry
  3. 1994The late-bull intermarket clock and regression-channel gates
  4. 1995Seasonal and political cycle maps as tested abstention regimes
  5. 2001Year-end high and low as a four-state regime filter
  6. 2002A six-market moving-average regime map from 2002
  7. 2003Gold as a regime marker after equity leadership fades
  8. 2003A four-season regime map before the shorter chart
  9. 2003From downtrend to trading range: implied volatility and volume after a shock fades
  10. 2006Exit discipline after regime shocks
  11. 2006Liquidity, growth, and midcycle market regimes
  12. 2006Yield-curve spread as an equity regime filter
  13. 2008Commodity, credit and bond alignment is not a forecast
  14. 2013Two lookback windows locate the cycle across bonds, stocks, and commodities
  15. 2014When ranging ends, replace the relative strength index, not its lookback
  16. 2016A Treasury-high-yield ratio as an equity regime filter
  17. 2016One-off shocks versus seasonal and secular regimes
  18. 2018Yield-curve flattening as missing market-regime context
  19. 2019Classifying six market phases around a single trade
  20. 2020Evaluating a two-window seasonal equity-bond switch
  21. 2020Dating energy regime breaks before the trade
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