gammaroadcapital

April 9, 2026 Strategy Update

Thu, 09 Apr 2026 15:39:36 GMT

The correction that began in February picked up steam in March, as the S&P 500 Total Return Index declined -4.98% for the month and brought its year-to-date return to -4.33%. The MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) entered March with only one of its three measures bullish for equity exposure. The price direction measure, which gauges the market’s overall price trend, turned bearish towards the end of the month. This caused the strategy to exit its remaining equity exposure and reallocate to 100% T-Bills exposure. As a result, the strategy declined by a more modest -2.83% in March, which brought its year-to-date return to -1.88%.

As we have noted through several prior monthly updates, we expect market conditions may be more susceptible to a meaningful increase in volatility when only one out of three measures is bullish. This expectation is even more pronounced when all three measures are bearish, i.e. when the strategy’s Aggregate Index Signal equals zero, where it sits at the time of this writing.

The following chart provides our basis for this higher expected volatility. The chart shows the annualized volatility for the S&P 500 Total Return Index’s daily returns since the base date of the MVGMMA Index, categorized by the level of the MVGMMA’s Aggregate Index Signal.

We chose January 29, 1993 as the base date for the MVGMMA Index so that the full research period would coincide with the inception of the SPDR® S&P 500® ETF Trust (“SPY”), which has the longest history amongst the largest and most liquid ETFs that passively track the S&P 500 Index.

Source: GammaRoad Capital Partners, LLC. This chart depicts the annualized volatility for the S&P 500 TR Index through points in time during which the MVGMMA Aggregate Index Signal was at each of its possible levels. The MVGMMA Index launched on December 22, 2023. Prior to December 22, 2023, all data points shown herein reflect periods when the MVGMMA Index was not actually published. Past performance is not indicative of future results. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

The End of Military Hostilities Does Not Eliminate the Persistence of Market Risks

Last month we shared our thoughts on several dominant market risk themes , including:

The potential inflationary impulse from developing supply shocks in energy and agriculture due to the conflict in the Middle East;

The public market’s repricing of private credit managers, their publicly traded portfolios, and the associated illiquidity risk; and

The market’s shifting sentiment towards industries perceived as increasingly vulnerable to AI disruption, particularly software.

Regarding the latter two risk themes, the price weakness we noted last month for publicly listed banks, credit managers, and BDCs continued to indicate deterioration in loan books and underlying asset values through March and into early April, as shown in the chart below:

Source: GammaRoad Capital Partners, LLC. Past performance is not indicative of future results. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

The private credit and AI disruption risk themes certainly have not gone away, rather they have accelerated and (understandably) just taken somewhat of a back seat in media coverage to the war. As the conflict has evolved, we see that the damage already inflicted upon energy production and storage facilities, core inputs for crop fertilizer and for the petrochemical industry, and the related shipping challenges all have the potential to drive persistent inflationary pressures even after the military conflict finally abates.

The time-related uncertainty surrounding the recovery for these areas will then become a key influence over inflation risk and its persistence. The list of known unknowns in this regard is daunting to say the least:

To what degree will the fractured nature of Iran’s military command compound the challenge of maintaining the potentially fragile ceasefire?

How long will it take to complete repairs and restart production at damaged energy facilities?

How much time will insurance underwriters require to see stability before they can price transit risk through the Strait of Hormuz and nearby regional waters?

Will Iranian authorities continue to assess hefty toll fees on vessels that are permitted to sail through the Strait of Hormuz?

How deeply will crop fertilizer inventories be depleted, how long might fertilizer applications be delayed, and how high will food prices rise due to lower yields?

To what degree will the oil supply shock impact the petrochemical industry, which factors into the cost of almost any packaged item purchased at the supermarket?

Why Monetary and Fiscal Stimulus, If Needed, May Be More Constrained

Market participants have come to expect that if asset prices take a significant turn for the worse and the economy falters, then the central bank and the federal government will simply stimulate enough to rescue markets and fuel the next rally. The enormous monetary and fiscal policy responses to the Global Financial Crisis and the Global Pandemic certainly went a long way to cementing this expectation. However, just as we cautioned last month against treating all geopolitical events as a homogenous group, here we see a crucial difference in the unfolding Middle East conflict versus the GFC and the pandemic.

Specifically, the collapse of the residential real estate market and the resulting severe economic decline during the GFC were entirely deflationary in nature. Likewise the drastic economic shutdown during the global pandemic was entirely a deflationary event. The threat of outright deflation provided cover for monetary and fiscal policymakers to stimulate with tremendous magnitude. Liquidity can be used to address potential solvency problems when the prevailing conditions are deflationary.

By contrast the conflict today is markedly more inflationary in nature. The combination of higher energy and agricultural prices, food packaging costs and other petrochemical products, increased military spending, and growing political pressure to mitigate the affordability crisis, all suggest that the Federal Reserve in particular may face much greater constraints in providing stimulus relative to previous episodes.

What the Strategy’s Positioning Might Mean in the Current Environment

The confluence of the war’s inflationary implications with the deterioration in private credit and concerns over AI disruption potentially exacerbates the equity market’s vulnerability to a deeper drawdown. That said, we always want to emphasize that our framework does not aim to provide a market forecast. Instead, the MVGMMA Index seeks to provide an objective, continuous, diagnostic assessment of U.S. equity market risk at any point in time. This is why we frequently characterize the process as a nowcast rather than a forecast .

The strategy’s 100% allocation to T-Bills entering April suggests that the current market environment is commensurate with the least favorable conditions for U.S. equity exposure, when viewed through the lens of the MVGMMA Index’s three risk measures. If market conditions improve significantly from here, we expect the strategy’s unbiased, systematic process to respond accordingly and increase equity exposure. If instead the market correction deepens, the strategy is positioned to deliver on its objective and reduce portfolio risk when it is needed most.

For a refresher on the strategy’s architecture and underlying process, please watch our video here .

March 9, 2026 Strategy Update

Mon, 09 Mar 2026 15:09:24 GMT

The U.S. equity market rally stalled somewhat in February as the S&P 500 Total Return Index fell -0.76% for the month, which brought its year-to-date return to +0.68%. The MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) fared well, as it had reduced its equity exposure to 33.33% and increased T-Bills exposure to 66.67% at the start of February. As a result the strategy returned -0.11% for the month, which brought its year-to-date return to +0.97%.

Last month we reiterated our expectation that when only one of the strategy’s three measures is bullish (as the strategy is currently positioned), market conditions may be more susceptible to a meaningful increase in volatility. The beginning of March has lived up to that expectation thus far, and now with the outbreak of military conflict in the Middle East the uncertainty band around potential outcomes has only widened.

While we normally confine our commentary in these monthly updates to U.S. equity market conditions, we feel it would be helpful to share some broader context for how our strategy might navigate the developing convergence of several global themes.

Why Energy and Agricultural Supply Risks Matter to Conventional Portfolios

While it is merely days since the military conflict began, we believe the severity of the energy supply disruption, the resulting spike in oil and gas prices, and therefore the inflationary implications are only beginning to be priced into global markets.

Coming into this conflict, the consensus view embraced the narrative that the global oil market is well-supplied. The combination of the ongoing attacks on regional oil and LNG facilities, the virtual closings of both the Strait of Hormuz and the Bab el Mandeb (the lesser known but strategically vital strait for shipping access to the Red Sea), and the increasing cancellations of insurance coverage for shipping throughout the Middle East is causing a swift recalculation of that consensus.

European, U.K., and Asian markets are all highly sensitive to this energy shock given their disproportionate dependence on oil and gas from the Middle East, and the early reaction in those equity markets is reflecting that sensitivity, as shown in the following chart:

Source: GammaRoad Capital Partners, LLC. This chart shows the local currency returns for various market capitalization-weighted equity indices and for the MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) since the current conflict in the Middle East began. Past performance is not indicative of future results. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

While energy disruptions capture most of the headlines, food supply may be impacted on a significant scale as well. Roughly 25% of globally traded nitrogen fertilizer is shipped through the Strait of Hormuz. Nitrogen is a primary input for improving crop yields, particularly corn, wheat and rice. A reduction in nitrogen applications can significantly reduce yields.

The timing of this disruption heightens the risk, as most fertilizer is procured in advance of the spring planting season, which is rapidly approaching. The U.S. does not maintain a backup supply of nitrogen fertilizer comparable to the Strategic Petroleum Reserve for crude oil, i.e. there is no dedicated backstop available beyond traditional commercial stockpiles in the event of a prolonged disruption to fertilizer supply.

The longer this conflict endures, the inflationary pressures likely to come from these supply shocks combined with the ramp up in military spending will cast considerable uncertainty on monetary policy in the coming months, particularly if economic growth begins to materially weaken at the same time that inflation accelerates.

The +0.12% rise in 30-year Treasury yields since the war’s outbreak only one week ago suggests that the bond market’s repricing of inflation risk is far outweighing any safe haven bid that Treasuries may be receiving, if that safe haven status still exists.

Historically this type of stagflationary market environment sees an elevated correlation between equities and bonds, which means that “balanced” funds might not be balanced at all. If that sounds far-fetched or unusual, it is likely because the 1970s decade provides the most recent extended example within U.S. history.

MVGMMA’s measures for economically sensitive asset relationships and consumer confidence appear to be reflecting these conditions. Gold’s relative outperformance of the more cyclically sensitive assets, specifically copper and lumber, continues to suggest weaker economic growth. Likewise, we would expect that higher inflation, concerns over a weaker labor market, and rising interest rates can weigh further on the consumer confidence measure’s bearish stance.

Don’t Worry

We have seen many assertions in response to the Middle East conflict that “the market is typically higher after a certain time period following geopolitical events”, which suggests that these developments are not a cause for concern. This is a dangerous assertion because it treats geopolitical events as if they were a homogenous group. Each historical event has its own idiosyncratic dynamics which in many ways can make each event completely incomparable to others. We would respectfully caution that lazy thinking can lead to impaired portfolio values.

Private Markets, Illiquidity, and Reflexivity

A prolonged conflict may also mean that investors who have significantly increased their exposure to private assets in recent years may now begin to face some uncomfortable portfolio dynamics. A meaningful deterioration in equity markets and a continued rise in credit spreads would make it more challenging for private equity and private credit funds to justify the marks many of them are carrying on their underlying assets. Due to their illiquid nature and delayed timing in writing-down asset values, the portfolio weight for private assets can actually rise at the same time that their net asset values are falling. Many institutional investors were forced to deal with this dilemma during the Global Financial Crisis, when the rapid selloff in liquid equities drastically outpaced the private markets write-downs that followed.

The markets are admittedly nowhere near that level of market distress at present. However, to draw from the old Hemingway adage, large-scale credit events seem to begin slowly and then happen all at once. Due to concerns arising from potential AI disruption (more on that below) and exposure to the software sector as the epicenter, the recent price weakness for publicly listed banks, credit managers, and BDCs has been increasingly indicative of deterioration in loan books and underlying asset values:

Despite this possible early warning message from these segments of the equity market, broader credit conditions have only shown a marginal reaction, as proxied by option-adjusted high yield spreads. Thus we are increasingly hearing this cycle’s version of “the credit stress is contained.” A review of longer-term high yield spreads suggests that if credit is indeed becoming a growing risk driver, then the repricing of this risk potentially has a long way to go:

Source: Federal Reserve Bank of St. Louis, GammaRoad Capital Partners, LLC. Past performance is not indicative of future results. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

Greater uncertainty and risk aversion are rarely a recipe for stabilizing a market segment already on shaky ground. Whereas this was primarily a software and AI disruption story prior to the war’s outbreak, a material selloff in equity markets would likely exacerbate these growing credit market concerns. Liquidity is most needed at the times when it becomes most scarce.

AI Disruption

The bullish argument for industries vulnerable to disruption appears to be predicated on AI’s current capabilities and limitations at present, rather than where they are headed. We view this as a meaningful disconnect between narrative and reality. A simple comparison of AI’s current capabilities versus only 12 to 18 months ago suggests that the pace is accelerating exponentially.

The market reaction, as always, is gradually pricing where this is all going, not where it is now.

Another narrative we are encountering can be summarized: “Major technological shifts have always given way to entirely new job segments that we couldn’t even imagine at the time.” Historically that was a safe assumption because human intelligence was always the scarcest asset and the driving force to create, and more importantly, populate those new jobs. That may not be the case going forward. We are collectively following a path where the source of disruption will likely be more capable and efficient than humans at performing any new jobs that arise.

The inflationary impact from the expansion of the AI-driven economy remains the subject of great debate. The capital expenditure, the heightened demand for base metals and energy usage, the real estate required, the construction labor, are all inflationary in nature. On the other side of these inputs, the potential for a productivity surge characterized by a massive reduction in employment is highly deflationary in nature. Job losses on a large scale likely translate to a reduction in discretionary consumption on a large scale.

There Is No Crystal Ball

We should stress that none of this discourse is intended to be predictive in any way. While we can attempt to identify sources of market stress and their interaction, we simply cannot know how any of this will unfold and how markets may respond.

We believe the greatest potential determinant of portfolio risk comes from the decision on how to hold and weight investments that can respond favorably to the widest spectrum of adverse possibilities.

We choose to place our confidence in our objective, rules-based process precisely because we appreciate the degree of uncertainty present in the current market environment. We have seen through our research (please see our April 2025 discussion) and through MVGMMA’s successful avoidance of last year’s tariff tantrum how the strategy’s three key measures can detect a meaningful change in market risk, regardless of the source.

For a refresher on the strategy’s architecture and underlying process, please watch our video here .

February 9, 2026 Strategy Update

Mon, 09 Feb 2026 14:25:12 GMT

Investors were rewarded with a positive start to the year as the S&P 500 Total Return Index returned +1.45% for January. The MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index), which had reallocated at the end of 2025 to 66.67% equity exposure and 33.33% T-Bills exposure, maintained its positioning through January and returned +1.08% to start the new year. As we enter February the strategy’s measure for economically sensitive asset relationships has turned bearish. This caused the strategy to reduce equity exposure to 33.33% and increase T-Bills exposure to 66.67%.

We now find the strategy once again positioned with its price direction measure as the sole bullish driver for maintaining equity exposure. As we have observed in prior monthly strategy updates (please see November 2024 and March 2025 ), our research suggests that when only one out of three measures is bullish, market conditions may be more susceptible to a meaningful increase in volatility.

We regularly revisit the following chart to illustrate our basis for this expectation. The chart shows the annualized volatility for the S&P 500 Total Return Index’s daily returns since the base date of the MVGMMA Index, categorized by the level of the MVGMMA’s Aggregate Index Signal.

As a reminder, we chose January 29, 1993 as the base date for the MVGMMA Index so that the full research period would coincide with the inception of the SPDR® S&P 500® ETF Trust (“SPY”), which has the longest history amongst the largest and most liquid ETFs that passively track the S&P 500 Index.

We often refer to the strategy’s framework as an ongoing process of “weighing the evidence” as it continually recalculates its three key risk measures . While the strategy’s consumer confidence measure has been consistently bearish since early 2025 and its price trend measure has remained bullish since mid-May 2025, its measure for economically sensitive asset relationships has experienced a tug-of-war since mid-July 2025. We covered this extensively in last month’s strategy update , which provided a more detailed step-by-step review of the strategy’s signal changes through 2025.

Despite the measure for economically sensitive asset relationships oscillating in this manner, the number of signal changes overall (and therefore the number of target weight changes) has remained within expectations, as shown in the following chart:

Source: GammaRoad Capital Partners, LLC. The MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) launched on December 22, 2023. Prior to December 22, 2023, the above target weight changes reflect backtested information based on the application of the MVGMMA Index methodology during periods when the MVGMMA Index was not actually published. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

Given the gradually increasing macro volatility that has characterized global developments over the past year, perhaps we should not be surprised to see this reflected in the strategy’s evaluation of the market environment to some degree.

The beauty of utilizing a rules-based, repeatable process over time is that the strategy will continue to weigh the evidence in exactly the same, consistent manner. Our confidence remains firmly entrenched in the strategy’s ability to detect significant changes in market risk regardless of the root cause, as it demonstrated through the months leading into the “Tariff Tantrum” last year. Please refer to our April 2025 monthly update for a more in-depth review of how MVGMMA’s combination of risk measures can adapt to such a material change in conditions without explicitly measuring the specific driver of that change.

For a refresher on the strategy’s architecture and underlying process, please watch our video here .

Special Update: Perspectives Following the MVGMMA Index's Two-Year Anniversary

Thu, 05 Feb 2026 00:22:52 GMT

Key Takeaways

Celebrated two-year anniversary in December 2025
De-risked to 100% T-Bills exposure in advance of the "Tariff Tantrum"
Can provide downside protection without capping upside participation
Live performance has tracked in line with research-based expectations
Complementary portfolio fit to buffer and hedged equity strategies

The MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index, “MVGMMA”) seeks to deliver comparable returns to the S&P 500 Total Return Index over the long term with significantly less drawdown risk.

We expect the strategy to deliver the lion’s share of its value by avoiding the most unfavorable market environments.

2025’s “Tariff Tantrum” presented the strategy with its first live test of bear market conditions.

While MVGMMA entered 2025 at its maximum equity exposure, each of its three equity risk measures caused the strategy to de-risk in gradual succession and ultimately hold 100% T-Bills exposure through the market bottom in April. This allowed the strategy to successfully avoid the majority of the drawdown. The following chart illustrates the strategy’s performance path through this period:

We know with hindsight that the market rallied impressively from its low in April. The red arrows and question mark in the chart serve as a reminder that we cannot know at the time whether the market will rally from this point, or whether this is the beginning of the next major bear market.

However, we do know from market history that bear markets can fall much further and can last for several years. An investor with an unlimited time horizon, unlimited capital, and complete immunity to emotionally driven decisions can afford to ignore this reality.

The rest of us must ask ourselves this crucial question: What else do I hold in my portfolio that can potentially protect capital in this manner?

Many investors have turned to buffer and hedged equity strategies as the answer. These approaches typically come with the trade-off of receiving a lower return than the market in exchange for the benefit of mitigating downside risk.

We believe that MVGMMA can provide comparable downside protection and potentially outperform most buffer and hedged equity strategies over the long term. The following table summarizes MVGMMA’s competitive advantages:

Based on the comparisons summarized in the table above, we expect MVGMMA to deliver a higher total return than most buffer and hedged equity strategies over the long term while providing comparable downside protection. We have seen evidence of this already in the first two years of MVGMMA’s live track record.

The strategy’s live performance relative to the market has also been in line with our expectations. The following chart shows MVGMMA’s performance during the research period from its base date of January 29, 1993 through December 21, 2023 (the date prior to its launch).

January 29, 1993 was chosen as the base date for the MVGMMA Index so that the full research period would coincide with the inception of the SPDR® S&P 500® ETF Trust (“SPY”), which has the longest history amongst the largest and most liquid ETFs that passively track the S&P 500 Index.

Source: GammaRoad Capital Partners, LLC. All performance information reflects the performance of the MarketVector™ -GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) and does not reflect the trading of an actual account. The MVGMMA Index launched on December 22, 2023. Prior to December 22, 2023, all performance shown herein reflects backtested information based on the application of the MVGMMA Index methodology to the SPY, SSO, and BIL ETFs’ price and dividend data during periods when the MVGMMA Index was not actually published. Past performance is not indicative of future results. Please see the important disclosures at the beginning of this presentation that are integral to understanding the limitations applicable to the quantitative information in the presentation.

This next chart shows the same metrics since the launch of the MVGMMA Index two years ago:

Here are our key observations from comparing MVGMMA’s live track record to our expectations based on the research period:

MVGMMA’s annualized volatility and maximum drawdown since its launch have both been significantly lower than those of the S&P 500 Total Return Index. These results are in line with our expectations based on the multi-decade research period.
The market’s annualized return has exceeded MVGMMA’s annualized return since its launch.

MVGMMA seeks to deliver comparable returns to the S&P 500 Total Return Index over the long term with significantly less drawdown risk. We define “the long term” as one complete market cycle or multiple market cycles.

As stated above, we expect MVGMMA to deliver the lion’s share of its value by avoiding the most unfavorable market environments.

Given that the live period does not represent a full market cycle, we do not yet know how much of the market’s recent returns may be given back during the eventual bear market that completes the current cycle.

We view this shorter-term performance difference as a worthy trade-off for potentially achieving the strategy’s long-term objective over the coming years.

While most buffer and hedged equity strategies share this same trade-off, we believe MVGMMA’s design provides multiple advantages (as shown in the table earlier) that can allow it to outperform most of these strategies. For this reason we view MVGMMA as an excellent complement within a portfolio’s equity allocation.

Why This Matters

As we enter the third year of MVGMMA’s live track record, the strategy’s performance has reinforced our confidence and belief that:

This strategy can grow your clients’ wealth better over the long term.

This approach can make you look smarter to your clients over the long term.

During the next bear market, this strategy can protect your clients’ capital in a way that can cement your clients’ loyalty and confidence in you.

For a refresher on the strategy’s architecture and underlying process, please watch our video here .

January 9, 2026 Strategy Update

Fri, 09 Jan 2026 14:34:32 GMT

The equity market’s rally took a bit of a breather in December yet still delivered its eighth consecutive positive month on a total return basis. The S&P 500 Total Return Index returned +0.06% for the final month of 2026, which brought its 2025 return to +17.88%. The MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) reallocated several times during the month based on its measure for economically sensitive asset relationships. This resulted in a net benefit as the strategy returned +0.26% for December and raised its 2025 return to +9.37%.

The strategy entered December with its price direction measure as the sole bullish driver for maintaining equity exposure. The consumer confidence measure, which had turned bearish towards the end of January last year, remained bearish through year-end. By contrast, December proved to be a more active month for the economically sensitive asset relationships measure, which experienced a tug-of-war between its underlying inputs for copper and gold prices.

As a reminder, this measure evaluates the price strength of cyclically sensitive assets (specifically copper and lumber) relative to the price strength of gold as the countercyclical asset. While this measure’s calculation incorporates a smoothing mechanism to address the inherent volatility that should be expected with commodity prices, the sharp price moves in December for both copper and gold caused this signal to first turn bullish in mid-December, then briefly reverse to bearish, and finally to turn bullish once again at the end of the month.

As referenced above, these signal changes and the strategy’s commensurate reallocation between equity and T-Bills exposures delivered a net benefit in December for the strategy’s performance relative to the overall market. While this was nice to see, we should emphasize that this was merely a short-term byproduct of the strategy’s long-term investment process. The strategy intends to deliver its value over a full market cycle primarily by avoiding as much of the equity market’s worst drawdowns as possible, rather than by attempting to capitalize on the type of smaller intra-month moves that the market experienced in December.

Last year provided a sterling example of how the strategy can deliver on its objective for downside protection. Despite entering 2025 at maximum equity exposure, each of the strategy’s three risk measures caused the strategy to de-risk in gradual succession ahead of the market’s most significant drawdown in several years. This began in late January with consumer confidence turning bearish, which caused the strategy to reallocate to 66.67% equity exposure and 33.33% T-Bills exposure. Next in mid-February the measure for economically sensitive asset relationships turned bearish, and the strategy reallocated to 33.33% equity exposure and 66.67% T-Bills exposure. The market sell-off then deepened enough to turn the price direction measure bearish in mid-March, and the strategy entered the throws of the tariff tantrum at 100% T-Bills exposure.

The following chart illustrates this de-risking path through the market’s low in early April:

As we all know with hindsight, 2025 was truly a tale of two markets. Following the violent drawdown that bottomed in early April, the market staged an impressive rally through the remainder of the year. The strategy’s measure for price direction responded by turning bullish in mid-May and has remained bullish since. Its measure for economically sensitive asset relationships then initially turned bullish in mid-July, remained bullish until early September, and then oscillated several times in December. After successfully navigating the brunt of the tariff-driven drawdown, the strategy then participated modestly in the rebound that followed, as shown in the following chart:

The equity market’s resilience in 2025 raises the natural question, “Why follow a risk-managed investment process rather than just ride it out?”

The answer begins with the reality that when any drawdown begins, we cannot know if this will be a common, short-lived correction or a more rare and significant bear market that can potentially alter one’s financial plans. As we observed in last month’s update , an investor with an unlimited time horizon, unlimited capital, and complete insulation from emotionally-driven decisions can afford to ignore this reality.

Given that we simply cannot know the severity of a potential bear market in advance, we recognize that the true nature of investment risk is not the manifestation of some unknown market event. Rather, as we noted last month, the true risk “is the possibility that an investor’s portfolio does not include a strategy that can mitigate a drawdown of significant magnitude, regardless of the cause.”

We stated above that 2025 provided a sterling example of the strategy’s ability to deliver on its objective to mitigate downside risk. Notably, this was also the strategy’s first opportunity to prove its intended value during its live track record since the MVGMMA index launched on December 22, 2023.

This highlights one of our greatest sources of confidence in the strategy’s potential to navigate market uncertainty. As we noted in our April 8, 2025 update (ironically published on the same day as the market’s low), none of the causes of each bear market during the strategy’s research period represent an explicit input into the strategy’s process, yet the equally-weighted combination of our three risk measures still demonstrates the potential to detect a meaningful increase in equity market risk, regardless of the root cause:

Dot-Com Bubble: valuation is not an input.
Global Financial Crisis: real estate, leverage, credit underwriting are not inputs.
Global Pandemic: the spread of an unknown virus (of course) is not an input.
Rising Inflation and Interest Rates in 2022: neither of these are inputs.

While we naturally have conviction in our research process, live performance is understandably all that matters to market participants. Like the examples listed here, tariffs and trade policy are not utilized as inputs or directly measured in any way by the MVGMMA Index, and yet the strategy’s combined measures effectively responded to increasingly unfavorable market conditions in advance of the largest market sell-off in several years, which fell just shy of the conventional definition of a bear market (i.e. down -20%).

Perhaps the market will experience another material correction in the year ahead. Whenever the next correction occurs, we simply cannot know if it will develop into something similar to the tariff tantrum, or something far more significant like the bear markets noted above. Either way, we believe the strategy’s architecture provides a compelling answer to this uncertainty and a valuable complement to traditional buy-and-hold approaches within any portfolio.

Given that we expect the majority of the strategy’s long-term value to be delivered by avoiding equity exposure during the most unfavorable market environments, we are comfortable with the trade-off of shorter-term divergences from market performance like we saw in the second half of 2025. As the strategy enters the new year with 2 of its 3 key measures bullish, we expect our rules-based process to consistently evaluate market conditions and adapt accordingly.

For a refresher on the strategy’s architecture and underlying process, please watch our video here .

December 9, 2025 Strategy Update

Tue, 09 Dec 2025 13:59:17 GMT

The equity market shrugged off its intra-month volatility and delivered its seventh consecutive positive month, as the S&P 500 Total Return Index returned +0.25% for November and improved its year-to-date return to +17.81%. The MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) weathered the intermittent volatility during the month and returned +0.26%, which raised the strategy’s year-to-date return to +9.08%.

Last month we discussed the increasing prevalence of the “bubble” question . During November that chorus only grew louder, and was often accompanied by the refrain “Why worry when the market is at all-time highs?” This sounds like crossing the street when there is no visible traffic, safely arriving at the other side, and concluding that there is no risk involved. This also highlights a crucial (and often underappreciated) principle of risk, specifically that the combination of probability and magnitude matters far more than probability alone .

The following chart illustrates the number of all-time highs (shown in red along the bottom) made by the S&P 500 Index each year from 1958 through November 2025. We begin the period with 1958 because that is the first full year when the S&P 500 Index was published in its current form of 500 constituent companies.

Source: GammaRoad Capital Partners, LLC. Past performance is not indicative of future results. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

We can qualitatively summarize this chart with the observation that we see clusters of years where the market has persistently registered all-time highs, followed by multi-year periods without a single all-time high being registered.

Does the number or frequency of all-time highs provide any informational value for the potential risk at any point in time? Here we find our answer to the “why worry” question posed earlier. Market participants that have lived through at least one full market cycle understand all too well that owning equities at all-time highs almost always works well…until it doesn’t.

The chart above reinforces the challenge in assessing the relevance of all-time highs without considering any measurable context for the current market environment. While it may be that all-time highs have historically shown a very high likelihood for further gains, the measurable favorability of the market environment can significantly influence that likelihood.

Let’s now use the MVGMMA Index’s framework for how favorable the market environment may be at any point in time. We can revisit the first chart above by overlaying the MVGMMA Index’s target equity weight at the time of reallocation since the strategy’s base date of January 29, 1993. As a reminder, we chose this base date for the MVGMMA Index so that the strategy’s full research period would coincide with the inception of the SPDR® S&P 500® ETF Trust (“SPY”), which has the longest history amongst the largest and most liquid ETFs that passively track the S&P 500 Index.

Source: GammaRoad Capital Partners, LLC. The S&P 500 Index is shown here on the y-axis to illustrate the index price level as the MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) target equity weight changes over time. The MVGMMA Index launched on December 22, 2023. Prior to December 22, 2023, the above target equity weight changes reflect backtested information based on the application of the MVGMMA Index methodology to the S&P 500 Index price data during periods when the MVGMMA Index was not actually published. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

This brings us back to our analogy of crossing the street when it appears the coast is clear. When a market is continually making new highs, history suggests the likelihood of a steep drawdown is fairly low. However, the times when this likelihood does not play out favorably have been accompanied by drawdowns that are large enough to impact long-term financial plans, as denoted by the red arrows in the chart above. An investor with an unlimited time horizon, unlimited capital, and complete insulation from emotionally-driven decisions can afford to ignore this reality. We have not yet met such an investor.

Any process that can meaningfully measure and adapt to a deterioration in underlying market conditions can provide tremendous value for understanding when the persistence of all-time highs may be subsiding.

So which scenario are we living through right now? Of course it is impossible to know in advance. Therefore the greatest risk is not the likelihood or magnitude of any potential adverse event occurring. It is the possibility that an investor’s portfolio does not include a strategy that can mitigate a drawdown of significant magnitude, regardless of the cause.

We believe the best portfolio answer to market uncertainty is to include an investment strategy that relies upon a repeatable rules-based process with measurable drivers that can complement more traditional, long-only passive exposures. We saw the complementary value of this approach earlier this year when our strategy reallocated to 100% T-Bills by mid-March and successfully navigated through the tariff tantrum unscathed, and then modestly increased market exposure to participate during the subsequent rebound.

This year provides a clear example of how the strategy’s process seeks to deliver the lion’s share of its value by avoiding the worst of the market drawdowns that inevitably recur over longer time horizons. The strategy’s complementary nature materializes by balancing the trade-off of appreciating more modestly than the market at times with the potential benefits of experiencing a smoother ride and meaningfully protecting capital to maximize long-term compounding.

The strategy enters December with price direction as its sole bullish risk measure and thus maintains its conservative equity exposure to start the month. Should the market rise and extend to further all-time highs, we expect the strategy will continue to participate in the rally, and possibly to an even greater degree if either of its measures for consumer confidence or economically sensitive asset relationships turn bullish. If instead the market is nearing a meaningful turn, the strategy is well-positioned to weather the potential drawdown and continue to deliver on its long-term objective.

For a refresher on the strategy’s architecture and underlying process, please watch our video here .

November 7, 2025 Strategy Update

Fri, 07 Nov 2025 14:59:16 GMT

The equity market’s relentless march higher since its April low has given way to an increasing chorus of investors asking “Is this a bubble?” Indeed the market delivered another strong month to fuel this developing narrative, as the S&P 500 Total Return Index returned +2.34% for October and brought its year-to-date return to +17.52%. The MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) maintained its conservative positioning through the month and returned +1.04%, which raised its year-to-date return to +8.80%.

We would humbly suggest that the “bubble question”, while entertaining to discuss, is not the most helpful question to be asking now. At any point in any market cycle, we believe the only relevant question for an investor is “What is my plan, regardless of what the market might do from here?”

The current market environment and this growing “potential bubble” narrative more than ever exemplify the value of preparation by adhering to a rules-based process. The seemingly widespread fascination with constantly attempting to figure out the market’s next move is born from the natural human proclivity for storytelling, yet it provides no substitute for having a plan already in place before portfolio risk can be compounded by emotional interference.

Given this context, let’s review the path of our strategy’s three key measures of market risk this year, and what they are saying as of early November.

Consumer Confidence

The strategy’s measure for consumer confidence turned bearish in late January and is the only one of its three measures to remain bearish since. This contributed to the strategy’s successful avoidance of the violent tariff-driven drawdown earlier this year, and subsequently to the strategy’s mostly defensive positioning during the ensuing rally.

We have read some commentary in the past year suggesting that the relationship between consumer confidence and equity market risk has weakened significantly, as discretionary consumption has become marginally less influential for the domestic economy overall and therefore less influential for market risk. We do not consider consumer confidence to be a narrow, oversimplified barometer for discretionary consumption alone. Rather we view consumer confidence as the broader propensity for consumers to spend more or less, for business owners and managers to increase or decrease hiring, and for credit providers to increase or decrease lending. Our research process requires us to continually revisit the decades of evidence that support the use and construction of each of our strategy’s three risk measures. Based on this ongoing evaluation for consumer confidence, we do not see any evidence that the U.S. economy (nor its flow-through to the equity market) has made a structural shift away from its dependence on discretionary consumption, employment growth, or credit expansion.

This discussion also highlights our belief that developing and maintaining any edge in markets is often less about what you are measuring and more about how you are measuring it .

Economically Sensitive Asset Relationships

The strategy’s measure for economically sensitive asset relationships has reflected a mixed picture for most of the year regarding the robustness of the current economic expansion. As a reminder, the design of this measure intends to capture the tug-of-war between cyclically sensitive commodities, specifically copper and lumber, and a historically countercyclical commodity: gold. Most recently this measure turned bearish in early September and has remained bearish entering November.

We are cognizant that gold can be a controversial topic and is likely receiving a significant bid in recent years due to a confluence of macro and geopolitical factors that are beyond the scope of this update. However, we observe from market data spanning nearly six decades since the United States officially suspended the convertibility of the U.S. dollar into gold, that the price of gold has tended to show strength relative to cyclical assets during times of heightened risk aversion, economic weakness, and/or policy uncertainty. We view the relative price behavior between cyclically sensitive assets and gold as the degree to which markets are pricing in underlying economic expansion or contraction, which in turn exerts an intuitive influence on equity market risk.

We are also sympathetic to the view that the long-term financialization of the U.S. economy can certainly effect policy making, both monetary and fiscal. The chart below uses the Federal Reserve’s most recently published quarterly data to estimate the U.S. stock market’s total value relative to the size of the U.S. economy. While this relationship fluctuates meaningfully over time due to changes in economic growth and stock market performance, the total value of U.S. equities has clearly increased over time relative to the size of the economy:

Source: Federal Reserve Bank of St. Louis, GammaRoad Capital Partners, LLC. Past performance is not indicative of future results. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

This increase in the market value of financial assets relative to economic output has led some market participants to propose that perhaps the tail now wags the dog, i.e. the performance of the stock market now drives economic direction at the margin. We agree that there is likely a behavioral reflexivity at play here, where the increase in financial asset values for those businesses and households with significant asset exposure experience heightened optimism and therefore a higher propensity to spend more, hire more, invest more, etc. Perhaps that reflexivity has been a larger driver in recent years and might even partially explain the recent disconnect between consumer confidence surveys and market performance addressed above. That said, the economy still matters for the markets and the animal spirits that drive price rallies and drawdowns. The strategy’s measure for economically sensitive asset relationships continues to suggest a condition of inconsistent economic durability despite the market’s positive performance this year.

Price Direction

The measure for the market’s overall trend has proven to be the strategy’s most influential driver in several ways this year. Price direction was the strategy’s final measure to turn bearish in mid-March and cause the strategy to reallocate to 100% T-Bills exposure in advance of the tariff tantrum. It was also the first measure to turn bullish once again and allow the strategy to participate in the rebound since the market’s trough in early April. Given the success that this measure has had in navigating the market’s major swings this year, why not overweight this measure or even use this exclusively as the sole allocation rule?

The answer is that we approach system design in the same way as we would approach strategic asset allocation for a multi-asset portfolio. This begins with the principle that we are seeking to combine as many sources of durable, repeatable edge that have as little overlap as possible. This is true in every possible dynamic of potential overlap, including the actual input data used, the fundamental rationale for why each measure should influence equity risk, the measurement method itself, and the time horizon over which each measure is calculated. From our perspective, time horizon diversification remains one of the more underutilized components of most investment processes we have evaluated.

Additionally, we always look to avoid dependency on any single measure or input to drive a strategy’s process and performance. We choose to equally weight the strategy’s three risk measures within the allocation framework because we embrace the reality that we cannot know which measure will outperform the others over the coming years. Much like any quantifiable element of markets, the efficacy of any individual measure will always be time-varying.

We enter November with the strategy maintaining its conservative equity exposure, as only one of its three key risk measures remains bullish. Regardless of whether “this is a bubble”, we find comfort in utilizing a rules-based process supported by objective measurement that continually weighs the evidence. If the market is approaching a significant inflection, the strategy is positioned and prepared to navigate the changing environment accordingly.

For a refresher on the strategy’s architecture and underlying process, please watch our video here .

October 9, 2025 Strategy Update

Thu, 09 Oct 2025 13:41:05 GMT

The market welcomed investors to autumn as the S&P 500 Total Return Index delivered a +3.65% return for September, which brought its year-to-date return to +14.83%. The MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) reduced its equity exposure in early September as its measure for economically sensitive asset relationships turned bearish. The strategy returned +1.33% for the month and saw its year-to-date return increase to +7.68%.

Last month we discussed the market’s seasonal tendency for weakness in September. The market convincingly bucked that trend this year and reached a notable performance threshold on a longer-term basis. The bear market of 2022 bottomed on an intraday basis in October of that year, which makes the current rally from that low just shy of 36 months. The following chart shows the S&P 500 Total Return Index’s rolling 36-month annualized return since the index’s base date of January 4, 1988:

The chart above shows that during this nearly four-decade period the market has only achieved a higher 3-year return in the few instances highlighted by the shaded circles. Their historical context is noteworthy (listed here in reverse chronological order):

December 2021: just before the bear market of 2022,

February 2012: following the rally from the Global Financial Crisis bear market low, and

Multiple times between May 1997 through March 2000: during the run-up to the Dot-Com Bubble peak.

This last example might be the most informative for the implications today. This chart is not intended to suggest that the market must experience a major correction simply because it has reached this level of performance. The rolling annualized return can indeed slow from here while the market can still appreciate further (just at a slower pace). The market’s lofty return over the last three years, much like its lofty valuation and market concentration metrics, all represent potential conditions of vulnerability , but they are not necessarily actionable triggers for a change in market direction. We should always remain cognizant that an expensive, concentrated market can become even more expensive and concentrated before any change in these conditions. So goes the phrase “bull markets do not die of old age.”

Our strategy enters October conservatively positioned with only its price direction measure remaining bullish. As we noted in last month’s update, the strategy’s measure for economically sensitive asset relationships turned bearish once again in early September, which caused the strategy to reallocate to 33% S&P 500 exposure and 67% T-Bills exposure. The strategy’s measure for consumer confidence turned bearish in late January and has remained that way since. Given the historical context outlined above, we recognize that if the market’s potential vulnerability should manifest itself into a meaningful correction, the strategy’s defensive stance at present is well-positioned to navigate the change in market conditions.

For a refresher on the strategy’s architecture and underlying process, please watch our video here .

September 8, 2025 Strategy Update

Mon, 08 Sep 2025 13:45:32 GMT

The summer sun continued to shine for the U.S. equity market in August, as the S&P 500 Total Return Index gained +2.03% for the month and brought its year-to-date return to +10.79%. The MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) maintained its positioning through August and returned +1.50% for the month, which brought the strategy’s year-to-date return to +6.27%.

Many markets across asset classes can demonstrate seasonality to their historical performance, and the U.S. equity market is no exception. While the summer months typically deliver a favorable return profile, September has certainly earned its reputation as the least favorable month of the year for U.S. equities. We have come across several suggestions for why this may be the case. Regardless of the fundamental reasons, the market’s historical performance clearly shows the tendency for September to be a tough month.

The following charts illustrate this seasonal weakness. The first chart shows the average and median monthly returns for the S&P 500 Index (price only) from 1958 through 2024. We begin the period with 1958 because that is the first full year when the S&P 500 Index was published in its current form of 500 constituent companies. We show both the average and the median monthly returns, as we like to use multiple measures of central tendency wherever possible.

We see in the chart above that in addition to September’s record as the worst performing month overall, the average return for September has been significantly lower than the median return, which indicates that September’s monthly returns have been skewed by disproportionately larger losses.

The next chart shows how often each month has delivered a positive return during this period:

The next chart shows the annualized volatility of daily returns for each month:

To summarize the charts above, September has historically delivered the worst monthly returns and the lowest frequency of positive monthly returns by a meaningful margin for each metric. Given these observations, it follows that September has been one of the most volatile months as well.

As we are publishing this update in early September, we can share that the strategy’s measure for economically sensitive asset relationships has turned bearish once again. This caused the strategy to reduce its equity exposure to 33% and increase its T-Bills exposure to 67%. The last time the strategy reduced risk in this manner was in mid-February this year, on its way to eventually derisking completely in mid-March and holding 100% T-Bills exposure in advance of April’s tariff tantrum.

When the MVGMMA Index’s Aggregate Index Signal (“AIS”) changes to ‘1’, i.e. only 1 out of 3 measures bullish, we like to revisit our chart that illustrates the significant jump in our expectations for market volatility under these conditions:

Beyond this expectation for potentially higher market volatility, our research also suggests that periods when the strategy carries this positioning might be shorter-term in nature, and might ultimately resolve with a significant market move in either direction. We cover the basis for these expectations at greater length in our November 7, 2024 update and again in our March 6, 2025 update .

As we observed in those prior updates, our research suggests that when only 1 of the 3 measures is bullish, “…this condition can carry unique significance in its implications for the market environment. We find this to be an intuitive result of the strategy’s investment process. When only 1 of the strategy’s measures remains favorable, this can be considered “the last soldier standing.” This condition suggests that either the market has nearly exhausted its fuel for the current phase of the cycle (i.e. nearing the end of a cyclical bull or a cyclical bear), or the market is experiencing the-pause-that-refreshes on its way to resuming its prevailing trajectory.”

To bring this month’s update full circle, we find the strategy’s current positioning especially notable in the context of September’s seasonal weakness discussed above. The strategy’s price direction measure remains the sole bullish driver at present. If September lives up to its reputation, the strategy is well-positioned to weather the volatility.

For a refresher on the strategy’s architecture and underlying process, please watch our video here .

August 1, 2025 Strategy Update

Fri, 01 Aug 2025 14:57:21 GMT

Many investors have likely heard some version of the market adage “The trend is your friend until the end when it bends.” The U.S. equity market stayed true to this notion and continued its rally through July as the S&P 500 Total Return Index returned +2.24% for the month, which brought its year-to-date performance to +8.59%. We noted last month that if the strong rally off the April lows was “anticipating a meaningful transition to more favorable market conditions, then we would expect the strategy’s measures for consumer confidence and economically sensitive asset relationships to improve commensurately and increase the strategy’s equity exposure.” This came to fruition in mid-July as the measure for economically sensitive asset relationships turned bullish and the strategy reallocated to 67% S&P 500 exposure and 33% T-Bills exposure. As a result, the MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) returned +1.48% for the month, which brought the strategy’s year-to-date return to +4.70%.

How can we know when we’ve reached “the end when it bends?” Of course, we cannot know in advance. However, we can attempt to systematically measure the favorability of the market environment at any point in time. The MVGMMA Index seeks to do this through the lens of its three key drivers of U.S. equity market risk.

This highlights why we always characterize the strategy’s framework as a “nowcast” rather than a forecast. The underlying process is analogous to how a general physician performs an annual physical for a patient. The physician runs diagnostic tests to measure various critical drivers of health and identify potential sources of risk. This allows the physician to estimate the patient’s health status now, at the time of measurement. It does not provide for the physician to state what the patient’s health will be six months from now.

It is human nature for investors to seek models that demonstrate strong predictive skill, and then to position in anticipation of those predictions prior to any evidence materializing, i.e. to position before the predicted information is “priced in.” However, our research has taught us that relying on predictive models can be fraught with unreliability due to myriad pitfalls, including:

unstable assumptions,
inclusion of too many variables,
optimization to a particular variable value,
market cycle dependency and/or economic regime dependency, and
the application of linear tools to non-linear market relationships.

These represent just a few of the reasons why predictive models often prove much more fragile in live performance relative to hypothetical historical simulations. We find far more merit and realistic expectations through the process of repeatedly measuring current market conditions and following rules-based reactions to those measurements at quantifiable points of inflection.

Our research suggests that the strategy’s recent signal change to 2 out of 3 measures bullish has meaningful implications for the current risk environment. Since the MVGMMA Index’s base date of January 29, 1993, we observe that the S&P 500 TR Index demonstrates considerably calmer volatility at the current stance with 2 out of 3 measures bullish. The following chart shows the annualized volatility for the S&P 500 Total Return Index’s daily returns since the base date of the MVGMMA Index, categorized by the level of the strategy’s aggregate index signal.

The strategy enters August with its measures for economically sensitive asset relationships and price direction bullish, while its consumer confidence measure remains as the sole bearish risk driver within its framework. The current positioning provides for meaningful participation in further equity market appreciation, while the exposure to T-Bills can serve to mitigate the resumption of heightened volatility.

For a refresher on the strategy’s architecture and underlying process, please watch our video here .

July 9, 2025 Strategy Update

Wed, 09 Jul 2025 14:52:01 GMT

The powerful equity rally continued through June as the S&P 500 Total Return Index returned +5.09% for the month and has now returned +6.20% year-to-date. After reallocating to 33% S&P 500 exposure and 67% T-Bills exposure in mid-May, the MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) maintained its positioning through June and returned +1.93% for the month, which brought the strategy’s year-to-date return to +3.17%.

A natural topic for us to explore this month is how we might interpret the strategy’s conservative positioning as the market is making new all-time highs. Over the years we have witnessed considerable debate on the favorability of buying all-time highs for any market. This debate often reflects two schools of thought:

The contrarian-minded investor might expect this to be an unfavorable entry point, given that a market making a new all-time high has likely just experienced a significant run already, and therefore the opportunity for further gains is limited.

The momentum-minded investor might find this to be an attractive entry point, as a market that is making new all-time highs is likely showing considerable strength on an absolute basis.

The contrarian investor accepts the risk of missing considerable upside, while the momentum investor accepts the risk that the recent strength has run its course and the market subsequently reverses direction. Both approaches have merit and can provide valuable risk management elements to nearly any investment process.

An objective, rules-based approach can attempt to incorporate these benefits while remaining adaptive enough to estimate which approach might prevail whenever this scenario arises. As mentioned earlier, we enter July with the MVGMMA Index positioned at 1 out of 3 measures bullish while the S&P 500 Index closed June at a newly minted all-time high. We decided to look through MVGMMA’s full research period since its base date of January 29, 1993 to examine prior periods where only 1 of the strategy’s 3 measures are bullish and the S&P 500 Index is within 5% of its all-time highest close. The following chart of the strategy’s signal changes over time highlights these periods:

Source: GammaRoad Capital Partners, LLC. The S&P 500 Index is shown here on the y-axis to illustrate the index price level as the MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) target equity weight changes over time. The MVGMMA Index launched on December 22, 2023. Prior to December 22, 2023, the above target equity weight changes reflect backtested information based on the application of the MVGMMA Index methodology to the S&P 500 Index price data during periods when the MVGMMA Index was not actually published. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

We observe that the picture above reflects the contrarian-versus-momentum dilemma described earlier when 1 out of 3 measures is bullish and yet the market is near its all-time high. The chart shows periods such as late 1999 and late 2007, where the strategy indicates a far riskier equity environment than the prevailing price trend suggests, and the market is experiencing a significant inflection point in risk. We can also see periods like late 2015 and early 2016, where the market marched higher in anticipation of an improving market environment and the strategy’s bearish measures improved shortly thereafter.

The next chart shows the average short-term and intermediate-term returns for the S&P 500 Total Return Index when only 1 of the strategy’s 3 measures is bullish (i.e. the MVGMMA Aggregate Index Signal = 1), and separates these periods into those when the market is within 5% of its all-time high versus when the market is further away from its all-time high:

Source: GammaRoad Capital Partners, LLC. This chart depicts the average returns for the S&P 500 TR Index through points in time during which the MVGMMA Aggregate Index Signal (“AIS”) has a value of ‘1’ (i.e. only 1 of the strategy’s 3 measures is bullish) and the S&P 500 Index (price-only) is either within or not within 5% of its all-time highest closing price. The MVGMMA Index launched on December 22, 2023. Prior to December 22, 2023, all data points shown herein reflect periods when the MVGMMA Index was not actually published. Past performance is not indicative of future results. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

The next chart shows this same comparison using the median rather than the average:

Source: GammaRoad Capital Partners, LLC. This chart depicts the median returns for the S&P 500 TR Index through points in time during which the MVGMMA Aggregate Index Signal (“AIS”) has a value of ‘1’ (i.e. only 1 of the strategy’s 3 measures is bullish) and the S&P 500 Index (price-only) is either within or not within 5% of its all-time highest closing price. The MVGMMA Index launched on December 22, 2023. Prior to December 22, 2023, all data points shown herein reflect periods when the MVGMMA Index was not actually published. Past performance is not indicative of future results. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

Our main observation from these charts is that throughout the research period, the forward short-term and intermediate-term total returns for the market can be significantly lower when only 1 of the strategy’s 3 risk measures is bullish and the market is near its all-time high.

We show this comparison using both average and median forward returns, as we like to use multiple measures of central tendency wherever possible. Here we see the median values are meaningfully higher than the average values for the periods near the all-time high (the red bars in the second chart are higher than the red bars in the first chart), which indicates that these averages are heavily skewed by disproportionately larger losses.

As always, we should remain cognizant that this is a limited set of examples from the research period, and we look through these simply as another attempt to understand what the strategy’s current positioning might imply for the current market environment.

Most importantly, we should reiterate that there is no predictive element to this analysis or to the strategy’s architecture overall. The strategy’s process is entirely (and intentionally) reactive as its three measures recalculate and estimate the changing favorability of current market conditions. This is why we repeatedly characterize the strategy’s process as a “nowcast” rather than a forecast.

An observer may also ask, “Given the charts above, why not use the 1-out-of-3 bullish measurement as a contrarian signal when the market is further away from its all-time high?” The answer reflects our respect for the uncertainty of the future and our belief in the durability of the systematic process. Just because this scenario presents this way in a limited set of examples during the research period does not mean that it will play out this way again in the future. We simply do not know and cannot know. Therefore we choose to minimize the degrees of conditionality and the number of variables in any rules-based process as much as possible. We find that this approach can significantly improve our expectations for a systematic strategy’s durability over time. We cover our thought process on this aspect of system design in further detail here .

We enter July with the strategy’s price direction measure as the only bullish driver. If this proves to be another scenario where the strategy’s measures are correctly characterizing the risk environment despite the market’s lofty level, then the strategy is well-positioned to mitigate any resurgence in volatility.

If instead the market’s impressive rally is anticipating a meaningful transition to more favorable market conditions, then we would expect the strategy’s measures for consumer confidence and economically sensitive asset relationships to improve commensurately and increase the strategy’s equity exposure.

For a refresher on the strategy’s architecture and underlying process, please watch our video here .

June 9, 2025 Strategy Update

Mon, 09 Jun 2025 14:23:04 GMT

What a difference one month can make. The market’s impressive rally from the April lows continued through May, as the S&P 500 Total Return Index returned +6.29% for the month. This brought the market’s year-to-date return at +1.06% back into positive territory for the first time since January. The MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) held 100% T-Bills exposure through mid-May, until the market’s rally was sufficient to turn the strategy’s price trend measure bullish once again. As a result, the strategy reallocated to 33% S&P 500 exposure and 67% T-Bills exposure. The MVGMMA Index finished May with a +0.04% return for the month and +1.22% year-to-date.

This year continues to provide an excellent illustration of the strategy’s ability to adapt as market conditions change meaningfully. The annotated chart below shows how the strategy gradually derisked from late January through mid-March ahead of the tariff-driven plunge, and then recently reallocated to equity exposure in mid-May during the rebound.

Source: GammaRoad Capital Partners, LLC. The S&P 500 Index is shown here on the y-axis to illustrate the index price level as the MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) target equity weight changes during the time period shown. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

The strategy’s navigation through 2025 also highlights the behavioral trade-off that an investor can face when following an adaptive, rules-based approach. Specifically, there may be times when the strategy’s three measures are capturing the prevailing level of market risk in a highly effective and timely way, while at other times the strategy may seem to be somewhat out of lockstep with the market. To use 2025 as the current example:

At the market’s lowest close in April the S&P 500 TR Index had fallen -18.75% from its all-time high and was down -14.98% year-to-date, while the strategy was up +0.95% for the year.

Since that low in April, the market rallied +18.87% through May, while the strategy remained conservatively positioned and returned +0.27% during the same period.

This year has certainly been quite active for the strategy thus far, as it has reallocated five times through May. The strategy is not designed to adjust exposure frequently, and based on our research we would expect something like six signal changes per year on average. As shown in the chart below, the strategy’s historical research period and live history suggests that this can vary from year to year. This reflects another aspect of the strategy’s architecture that aims to provide durability and repeatability over multiple market cycles. The strategy’s three key measures of market risk aim to provide enough sensitivity to identify meaningful inflection points, without having too much sensitivity such that the process becomes prone to whipsaw-type behavior.

Source: GammaRoad Capital Partners, LLC. The MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) launched on December 22, 2023. Prior to December 22, 2023, the above target weight changes reflect backtested information based on the application of the MVGMMA Index methodology during periods when the MVGMMA Index was not actually published. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

The strategy enters June with only one of its three measures bullish, which suggests that we may still see additional bouts of volatility in the near-term. That said, it is also quite possible that the current rally continues to march higher. Either way, we expect that the strategy’s three key measures will continue to adapt and respond accordingly, as they have already demonstrated through the year thus far.

For a refresher on the strategy’s architecture and underlying process, please watch our video here .

May 8, 2025 Strategy Update

Thu, 08 May 2025 16:48:16 GMT

The S&P 500 Total Return Index fell modestly in April, although it likely did not feel anything like “modest” for equity investors. The market swiftly plummeted -11.19% through the first 6 market days of the month, before staging an impressive rally to finish down -0.68% for April and down -4.92% year-to-date. The MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) maintained its 100% T-Bills exposure throughout April and returned +0.34% for the month and +1.18% year-to-date.

The primary question on many investors’ minds might be “Is this a short-term spike in volatility, or is the next bear market unfolding?” By definition this can only be known with hindsight. The current environment brings front and center what we consider to be the most useful definition of investment risk. Specifically, we do not characterize risk as the possibility/probability of an adverse event that may cause the market to fall. Rather we define risk as the condition where an investor’s portfolio does not hold anything to meaningfully mitigate (or even benefit from) an adverse market reaction to these events.

The market volatility during April provides an excellent illustration of this. The conventional view of risk (i.e. the possibility of an adverse event) presents an insurmountable challenge as it requires an investor to manage risk in one of two ways:

1. Do nothing and ride out whatever may develop, regardless of the investor’s time horizon, risk tolerance, and portfolio objectives, or

2. Adjust portfolio positioning in a way that “gets everything right” in advance. To use the recent announcements of tariffs and new trade policies as our current example, this would require the investor to:

a. correctly estimate the size and scope of the new policies,

b. correctly estimate the magnitude of the market’s reaction to the new policies,

c. correctly identify when the market has fully priced in the impact of the new policies, and

d. correctly adjust the portfolio again.

Path #2, of course, is simply not possible in a repeatable manner. This is exactly the reason for the default chorus we always hear that investors should follow path #1 and simply ride out whatever may develop. Unfortunately, path #1 is also not possible in a repeatable manner for many investors, due to the crucial qualifier included above: “…regardless of an investor’s time horizon, risk tolerance, and portfolio objectives.”

Let’s highlight this point by viewing current market conditions through the lens of the MVGMMA Index’s three key risk measures. As we noted in last month’s update , since the January 29, 1993 base date of the MVGMMA Index, there are four extended periods prior to the current one where all three measures are bearish and the strategy holds 100% T-Bills exposure. They tend to stand out on our chart of signal changes over time:

Source: GammaRoad Capital Partners, LLC. The S&P 500 Index is shown here on the y-axis to illustrate the index price level as the MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) target equity weight changes over time. The MVGMMA Index launched on December 22, 2023. Prior to December 22, 2023, the above target equity weight changes reflect backtested information based on the application of the MVGMMA Index methodology to the S&P 500 Index price data during periods when the MVGMMA Index was not actually published. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

We cannot know if we are witnessing the next bear market unfolding, or whether this will be more analogous to the rapid recoveries during the Global Pandemic and 2022 drawdowns. However, we do know that many investors do not have the luxury of an unlimited time horizon and infinite risk tolerance to just “ride it out.” For example, an investor entering what turns out to be a deep and prolonged bear market while relying on their portfolio for retirement income or a large expense (e.g. home purchase, education, capital expenditure, etc.) may find with hindsight that riding it out was not a viable option.

This is the reason for allocating to a strategy that seeks to objectively measure the favorability of market conditions and then adapt accordingly as those conditions evolve. Whether we are living through the next prolonged bear market or another event-driven correction, the true value of the strategy’s process is to be prepared either way.

The strategy enters May at 100% T-Bills exposure and is positioned to weather further volatility. If any of its key measures for consumer confidence, economically sensitive asset relationships, or price direction improve enough to see a bullish inflection, the strategy will reallocate to equity exposure accordingly.

For a refresher on the strategy’s architecture and underlying process, please watch our video here .

April 8, 2025 Strategy Update

Tue, 08 Apr 2025 14:32:14 GMT

This has been quite a start to 2025, and this year is already providing an excellent opportunity for The MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) to demonstrate its value and potential to navigate significant changes in market conditions.

The S&P 500 Total Return Index experienced its second consecutive down month in March and fell by -5.63%. The MarketVector™-GammaRoad U.S. Equity Strategy Index benefitted from entering March at roughly 33% equity exposure and 67% T-Bills exposure. During the month:

the strategy's measure for consumer confidence remained bearish (since late January),
its measure for economically sensitive asset relationships entered the month bearish, briefly turned bullish, then turned bearish again,
its measure for price direction turned bearish.

As a result, all three measures of market risk became unanimously bearish by mid-March, and the strategy reallocated to 100% T-Bills exposure. The MVGMMA Index ultimately returned -2.27% for the month. Year-to-date through March 31st, the strategy returned +0.83% versus the S&P 500 Total Return Index’s return of -4.27%.

We highlighted last month that the strategy’s positioning entering March was notable for several reasons. Specifically, our research suggests that periods where only 1 out of 3 measures is bullish:

might be characterized by significantly higher volatility,
might be shorter-term in nature, and
might ultimately resolve with a significant move in either direction.

We can certainly say with hindsight that market conditions through March and early April have delivered on all three of these expectations. We now find ourselves in the unique position where all three of the strategy’s measures are bearish for taking equity risk. Simply stated, our process categorizes the current environment as the least favorable for holding equity exposure within our framework.

Since the January 29, 1993 base date of the MVGMMA Index, there are four periods where all three measures are bearish and the strategy holds 100% T-Bills exposure. They tend to stand out on our chart of signal changes over time:

Source: GammaRoad Capital Partners, LLC. The S&P 500 Index is shown here on the y-axis to illustrate the index price level as the MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) target equity weight changes over time. The MVGMMA Index launched on December 22, 2023. Prior to December 22, 2023, the above target equity weight changes reflect backtested information based on the application of the MVGMMA Index methodology to the S&P 500 Index price data during periods when the MVGMMA Index was not actually published. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

This highlights one of our greatest sources of confidence in the strategy’s potential to navigate market uncertainty. Specifically, none of the labels in this chart (the cause of each drawdown) represents an explicit input into the strategy’s process, yet the equally-weighted combination of our three risk measures still demonstrates the potential to detect a meaningful increase in equity market risk, regardless of the root cause:

Dot-Com Bubble: valuation is not an input.
Global Financial Crisis: real estate, leverage, credit underwriting are not inputs.
Global Pandemic: the spread of an unknown virus (of course) is not an input.
Rising Inflation and Interest Rates: neither of these are inputs.

Now we have the current drawdown in the equity market, which many market participants are attributing to the introduction of tariffs and drastic changes in trade policy. These developments come at a time when the equity market has reached extreme levels of high valuation and market concentration by almost any historical measure. To emphasize the point in today’s context: the strategy does not explicitly use any data derived from trade policy, valuation, or market concentration, yet the strategy has reallocated from maximum equity exposure at the start of the year to its current 100% T-Bills exposure during a seemingly abrupt shift to materially riskier equity market conditions.

This reflects the nature of complex adaptive systems where macro influences are seldom (if ever) independent or mutually exclusive. Our research shows us that the strategy’s three risk measures can withstand a gauntlet of disparate market risks over time and still satisfy our definitions for robustness and durability.

We would encourage anyone evaluating an investment strategy to ask this crucial question: can the strategy’s process adapt and respond meaningfully to changes in market conditions, even (and especially) when the drivers of those changes are not explicitly measured in the process?

Furthermore, is the strategy independent of assumptions that are only relevant to a specific time period, a specific economic regime, or a specific set of market conditions?

These are just a few of the considerations we view as imperative hurdles to overcome in our development of a rules-based investment process. As we enter April, the strategy’s navigation of 2025’s unfolding market conditions reinforces our views on why we expect our unbiased, objective process to work over time .

For a refresher on the strategy’s architecture and underlying process, please watch our video here .

March 6, 2025 Strategy Update

Thu, 06 Mar 2025 16:40:14 GMT

The MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) reduced its equity exposure for the second time since the start of the year, as its measure for economically sensitive asset relationships turned bearish during the second week of February. As a result, the strategy further lowered its equity weighting to 33% and increased its T-Bills exposure to 67%.

The strategy returned -0.05% for February and provided valuable risk mitigation relative to the S&P 500 Total Return Index, which fell by -1.30% for the month. Year-to-date through February the MVGMMA Index has returned +3.18% while the S&P 500 Total Return Index has returned +1.44%.

We find the strategy’s current positioning to be notable for several reasons. Specifically, our research suggests that periods where only 1 out of 3 measures is bullish:

might be characterized by significantly higher volatility,
might be shorter-term in nature, and
might ultimately resolve with a significant move in either direction.

As we observed in our November 7, 2024 update, our research suggests that when only 1 of the 3 measures is bullish, “…this condition can carry unique significance in its implications for the market environment. We find this to be an intuitive result of the strategy’s investment process. When only 1 of the strategy’s measures remains favorable, this can be considered “the last soldier standing.” This condition suggests that either the market has nearly exhausted its fuel for the current phase of the cycle (i.e. nearing the end of a cyclical bull or a cyclical bear), or the market is experiencing the-pause-that-refreshes on its way to resuming its prevailing trajectory.”

To illustrate the basis for these expectations, we have updated here several charts that we shared previously in this context.

The first chart below shows the annualized volatility for the S&P 500 Total Return Index’s daily returns since the base date of the MVGMMA Index, categorized by the level of the MVGMMA’s aggregate index signal. This chart supports our expectation that the market can be much more volatile when only 1 measure is bullish:

The second chart illustrates the strategy’s allocation process since the base date of the MVGMMA Index. The yellow segments identify the periods when the strategy initially reallocates to 33% equity, i.e. when only 1 out of 3 risk measures is bullish. The more notable occurrences are marked by arrows. This supports our expectations that the strategy’s current positioning may be shorter-term in nature and may precede a significant market move in either direction:

Source: GammaRoad Capital Partners, LLC. The S&P 500 Index is shown here on the y-axis to illustrate the index price level as the MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) target equity weight changes over time. The MVGMMA Index launched on December 22, 2023. Prior to December 22, 2023, the above target equity weight changes reflect backtested information based on the application of the MVGMMA Index methodology to the S&P 500 Index price data during periods when the MVGMMA Index was not actually published. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

As always, we should remain cognizant that this is a limited set of observations where the strategy reallocates to 33% equity, and our expectations are reinforced by the understanding that the next signal change would represent a potentially pivotal transition to either the riskiest market environment within our framework (i.e. all 3 measures are bearish) or a considerably more favorable environment (i.e. 2 out of 3 measures are bullish).

The strategy’s measure for price direction remains the sole bullish driver as we enter March. While we would not be surprised to see some oscillation in these risk measures over the coming months, the strategy’s rules-based process will continue to provide an objective method to filter out the daily noise and weigh the evidence accordingly over time.

For a refresher on the strategy’s architecture and underlying process, please watch our video here .

February 6, 2025 Strategy Update

Thu, 06 Feb 2025 16:45:24 GMT

The market continued its impressive run in January, as the S&P 500 Total Return Index rose by +2.78% for the month. The MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) benefitted by entering 2025 at its maximum equity exposure and returned +3.23% to start the year. Notably, the strategy’s measure for consumer confidence turned bearish during the final week of January, and thus the strategy reduced its equity exposure to 67% and reallocated 33% to T-Bills exposure. The strategy’s measures for economically sensitive asset relationships and price direction remain bullish.

This recent change in positioning suggests a somewhat less favorable equity market environment as we enter February. Market participants find themselves bombarded in the daily narrative with multiple reasons for this potential shift to riskier market conditions. Two dominant headline grabbers have come via the introduction of DeepSeek and the potential implementation of tariffs with key international trade partners.

We do not (and cannot) know how either of these developments will ultimately impact market risk. This all highlights and reinforces the fundamental reason for why we embrace a systematic approach based on the objective measurement of market influences that exhibit a high signal-to-noise ratio. Our research into our three risk measures illustrates a key attribute that drives our confidence in the strategy’s ability to adapt to evolving market conditions.

Specifically, we observe that the primary causes of each bear market since the MVGMMA Index’s base date listed below are not explicit inputs into the strategy’s process, yet the strategy’s three measures still detect a meaningfully adverse change in equity market conditions:

Dot-Com Bubble: excessive valuations
Global Financial Crisis: residential real estate and credit underwriting
Global Pandemic: rapid spread of an unknown virus
2022: rising inflation and interest rates

The following first chart illustrates how the strategy’s target equity weight changes at the time of each signal change since the base date of the MVGMMA Index. The gray ovals are included to highlight the bear market periods listed above. The second chart compares the strategy’s drawdowns to the S&P 500 TR Index’s drawdowns during each of these periods.

Source: GammaRoad Capital Partners, LLC. The S&P 500 Index is shown here on the y-axis to illustrate the index price level as the MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) target equity weight changes over time. The MVGMMA Index launched on December 22, 2023. Prior to December 22, 2023, the above target equity weight changes reflect backtested information based on the application of the MVGMMA Index methodology to the S&P 500 Index price data during periods when the MVGMMA Index was not actually published. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

Source: GammaRoad Capital Partners, LLC. All performance information reflects the performance of the MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) and does not reflect the trading of an actual account. The MVGMMA Index launched on December 22, 2023. Prior to December 22, 2023, all performance shown herein reflects backtested information based on the application of the MVGMMA Index methodology to the SPY, SSO, and BIL ETFs’ price and dividend data during periods when the MVGMMA Index was not actually published. Past performance is not indicative of future results. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

We are not suggesting that this is the beginning of the next major downturn. It is categorically impossible to consistently pick tops and bottoms, which by definition are only known in hindsight. As illustrated in the color-coded line chart above, the research suggests that the strategy’s recent de-risking may lead either to further weakening in market conditions, or this could simply be “the pause that refreshes” that precedes the strategy’s reallocation to maximum equity exposure.

This is the exact point of following the rules-based process. We cannot know with any degree of certainty how the market will react in direction and magnitude to these latest developments. However, we can follow the same repeatable process that demonstrates the potential to avoid significant portions of the worst drawdowns, which is orders of magnitude more important to long-term compounding than marginally outperforming on the upside. The trade-off is the possibility of periodic short-term underperformance as the strategy’s process continually weighs the evidence. Our research has shown that we should expect this to be a worthy trade-off over time.

For a refresher on the strategy’s architecture and underlying process, please watch our video here .

January 9, 2025 Strategy Update

Thu, 09 Jan 2025 18:39:17 GMT

To follow-up on our focus from last month’s update , the market entered December in rarified territory based on its lofty performance over the prior 12 months. The S&P 500 Total Return Index took a breather by falling -2.38% for the month, while still recording an impressive +25.02% for the full year. As previously noted, the MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) carried its maximum equity exposure heading into December and fell -3.16% for the month, while recording a +15.46% return for 2024.

The strategy’s three measures of market risk did not change during December, and thus the strategy enters the new year at its maximum equity exposure. This is particularly notable given the market's impressive run over the last two years, combined with an increase in realized volatility during December and the swelling number of traditional metrics that might cause concern for market participants, including valuation, market concentration, credit spreads near previous cycle lows, etc. A natural question or concern might be “What if the market is at or near a major top while the strategy holds its maximum equity position?”

Our primary objective with these monthly strategy updates is to provide insight into how the strategy is navigating the current market environment. To address these types of questions, we find it informative to examine periods since the MVGMMA Index's base date of 1/29/1993 that appear analogous to current market conditions and the strategy's current positioning. This month we decided to look back through the MVGMMA Index's research period for years where the strategy begins at maximum bullishness, and it turns out to be a down year for the market.

There are two such years since the base date of the MVGMMA Index: 2018 and 2022. Notably, both of these examples also include the condition where the market was comparably strong the prior year:

Source: GammaRoad Capital Partners, LLC. All performance information reflects the performance of the MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) and does not reflect the trading of an actual account. The MVGMMA Index launched on December 22, 2023. Prior to December 22, 2023, all performance shown herein reflects backtested information based on the application of the MVGMMA Index methodology to the SPY, SSO, and BIL ETFs’ price and dividend data during periods when the MVGMMA Index was not actually published. Past performance is not indicative of future results. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

As always, we should be cognizant that two annual examples from any research period represent a very limited sample. Our intention in this exercise is to walk through our research to understand how the strategy’s underlying process might navigate this set of analogous conditions. The following annotated charts illustrate the changes in the MVGMMA Index’s target equity weight at the time that its underlying signals change during 2018 and 2022.

Here is the view for 2018:

Source: GammaRoad Capital Partners, LLC. The S&P 500 Index is shown here on the y-axis to illustrate the index price level as the MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) target equity weight changes over time. The MVGMMA Index launched on December 22, 2023. Prior to December 22, 2023, the above target equity weight changes reflect backtested information based on the application of the MVGMMA Index methodology to the S&P 500 Index price data during periods when the MVGMMA Index was not actually published. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

Here is the view for 2022:

Source: GammaRoad Capital Partners, LLC. The S&P 500 Index is shown here on the y-axis to illustrate the index price level as the MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) target equity weight changes over time. The MVGMMA Index launched on December 22, 2023. Prior to December 22, 2023, the above target equity weight changes reflect backtested information based on the application of the MVGMMA Index methodology to the S&P 500 Index price data during periods when the MVGMMA Index was not actually published. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

We view the 2018 and 2022 examples as particularly informative for several reasons:

Both years include a sharp market correction early in the year and provide contrasting examples of how the strategy’s rules-based process might respond.

The correction in early 2018 proves to be sharp but short-lived, and all three measures remain bullish as the market rebounds into the summer.

The correction that begins in early 2022 proves to be more meaningful in magnitude and duration. The strategy’s three measures adapt to increasing risk in the market environment by reallocating from equity exposure into T-Bills exposure through the first half of the year.

Both years’ drawdowns are driven by market influences that are not explicit inputs for the strategy's three measures, yet these measures still detect a potentially less favorable risk environment.

The drawdown during the fourth quarter of 2018 is commonly attributed to the combination of the Federal Reserve’s gradual rate hikes during the year and the Fed's accompanying forward guidance during the fourth quarter.

The drawdown through 2022 is often attributed to the increasingly inflationary environment and the resulting monetary policy response.

We view the strategy’s de-risking during both periods, despite the fact that it does not explicitly incorporate monetary policy or inflation data, as indicative of its potential efficacy in evaluating the overall favorability of the market environment.

The value of limiting or avoiding significant drawdowns is orders of magnitude more important than outperforming on the upside. We see this principle continually appear throughout our research and it is particularly evident in the 2022 example.

The strategy’s process of weighing the evidence might include oscillation between bullish and bearish signals, rather than simply de-risking and re-risking in a stepwise, linear fashion. Additionally, the strategy's shorter-term performance between signal changes can deviate significantly from the market’s performance in either direction.

These are both expected characteristics of the strategy, and the shorter-term performance implications should not be surprising given that a signal change in any of the three measures causes a very meaningful change in the strategy's equity exposure.

The strategy is intentionally designed this way. Only meaningful changes in allocation weights can deliver meaningful differences in absolute or relative performance.

The strategy may endure shorter-term periods of underperformance and can still significantly outperform the market for the full year. We would assert that even a full calendar year can be considered “shorter-term” in the context of a long horizon, risk-managed investment process. That said, we remain cognizant that most market participants behaviorally focus on shorter-term periods rather than the “long run”, because an individual’s prevailing perception tends to be driven by recent day-to-day experiences.

This examination is intended to provide insight into how the strategy might navigate through the current setup if this year turns out to be challenging for equities. Naturally, the only guarantee in markets is uncertainty. This type of exercise highlights the value of employing a rules-based process driven by objective measurement, particularly when market volatility spikes and market participants without an established plan become most vulnerable to emotional decision-making. Rather than asking the typical question of “How should one’s portfolio be positioned?”, we would ask the far more impactful question “What is one’s method of handling uncertainty?”

For a refresher on the strategy’s architecture and underlying process, please watch our video here .

December 9, 2024 Strategy Update

Mon, 09 Dec 2024 17:58:35 GMT

We highlighted in our November update that we expect larger directional market moves following a period when only 1 out of 3 measures is bullish for the MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index). November certainly lived up to those expectations, as the S&P 500 Total Return Index was up +5.87% and rewarded investors with its strongest month of the year. The MVGMMA Index responded to the increasingly favorable market environment by significantly adjusting its risk posture from a conservative 1 out of 3 bullish measures at the start of the month to holding maximum equity exposure, and ultimately returned +3.17% for the month.

The strategy’s measure for Economically Sensitive Asset Relationships turned bullish in early November, followed by its Consumer Confidence measure turning bullish towards the end of the month. This most recent change caused the strategy to rebalance to 125% equity exposure and fully exit its T-Bills allocation.

This means that the strategy entered December carrying its maximum equity exposure at a time when the S&P 500 TR is already up +33.89% over the trailing 12 months. As the following chart illustrates, this is rather rarified territory for the market since the base date of the MVGMMA Index:

It is important to note that such an elevated one-year return does not mean that the market must fall from here, much like a lofty valuation metric or an extreme degree of market concentration does not mean that a downturn is imminent. We see many such charts and headlines making the rounds in recent months. While caution is always warranted when assessing market risk, we note that high valuation and heavier market concentration are merely observations, and not necessarily actionable in any immediate way. These types of metrics can remain elevated for years, or even moderate somewhat while the overall market still moves higher. This is a primary reason that we find far greater value in focusing on rates of change and quantifying potential inflections, rather than solely utilizing absolute levels, to attempt to navigate market risk in a repeatable and reliable manner.

Given the strategy’s meaningful increase in market exposure against this backdrop, we decided to look through the research period and examine prior instances where the strategy rebalances to maximum equity exposure after such a significant bull run for the overall market.

The following table shows the instances where the strategy rebalances to 125% equity exposure, i.e. where the MVGMMA Index’s Aggregate Index Signal (“AIS”) increases to ‘3’ after the daily close, when the market has already appreciated at least 30% over the trailing year. The table then shows the return for the S&P 500 TR Index from those points until the strategy’s next signal change. Note that we use 252 trading days as the convention for calculating the market’s one-year trailing return on any given date.

Source: GammaRoad Capital Partners, LLC. This table depicts the returns for the S&P 500 TR Index through points in time during which the MVGMMA Aggregate Index Signal (“AIS”) changed to a value of ‘3’ and the S&P 500 TR Index had already increased by at least 30% over the prior 252 market days. The MVGMMA Index launched on December 22, 2023. Prior to December 22, 2023, all data points shown herein reflect periods when the MVGMMA Index was not actually published. Past performance is not indicative of future results. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

We see this provides a limited set of observations from the research period with a wide range of outcomes. As always, we would exercise extreme caution in gleaning any inferences from such a limited sample. Given that the current setup comprises such a rare set of conditions, it is natural to want to see how prior similar conditions resolved themselves. However, the principle that “past performance is not indicative of future results” should remain front and center.

Does all of the above lead us to conclude that this is a fruitless thought exercise? Quite the contrary. We believe this uniquely highlights the value of implementing a systematic, repeatable process that can adapt as the market risk environment unfolds. It is far better to have an established plan in advance of a change in market conditions and not need that plan, than to experience a significant change in market conditions without having a plan already in place.

While it may feel somewhat uncomfortable or even surprising for the strategy to increase market exposure on the heels of an already significant market run-up, our research framework for evaluating the potential efficacy of the strategy’s rules-based process reinforces our confidence that the strategy will continue to objectively weigh the evidence and seek to respond to any material shifts in market conditions as they arise.

For a refresher on the strategy’s architecture and underlying process, please watch our video here .

November 7, 2024 Strategy Update

Tue, 26 Nov 2024 22:14:22 GMT

The market took a slight breather in October from its impressive run this year, as the S&P 500 TR Index fell -0.91% for the month. By contrast, the MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) was nearly flat at -0.05% for the month. The strategy benefitted from maintaining its conservative equity exposure and significant T-Bill exposure throughout October, as determined by its three key measures of market risk. Price Direction provided the strategy’s sole bullish signal, while Consumer Confidence and Economically Sensitive Asset Relationships remained bearish.

At the time of this writing, the strategy’s measure for Economically Sensitive Asset Relationships has turned bullish, and as a result the strategy rebalanced to 67% equity and 33% T-Bills. This measure seeks to capture inflections in underlying economic conditions through specific commodity price relationships. Given this shift to a more favorable reading for equity risk, we decided to take a deeper look back through our research for further context on the strategy’s current positioning.

We observe through our historical research that when only 1 out of 3 measures is bullish (as was the case throughout October), this condition can carry unique significance in its implications for the market environment. We find this to be an intuitive result of the strategy’s investment process. When only 1 of the strategy’s measures remains favorable, this can be considered “the last soldier standing.” This condition suggests that either the market has nearly exhausted its fuel for the current phase of the cycle (i.e. nearing the end of a cyclical bull or a cyclical bear), or the market is experiencing the-pause-that-refreshes on its way to resuming its prevailing trajectory.

The chart below illustrates the strategy’s allocation process over time since the base date of the MVGMMA Index. The yellow segments identify the periods when the strategy initially rebalanced to 33% equity, i.e. when only 1 out of 3 risk measures was bullish. The more notable occurrences are marked by arrows.

Source: GammaRoad Capital Partners, LLC. The S&P 500 Index is shown here on the y-axis to illustrate the index price level as the MarketVector™-GammaRoad U.S. Equity Strategy Index (Bloomberg: MVGMMA Index) target equity weight changes over time. The MVGMMA Index launched on December 22, 2023. Prior to December 22, 2023, the above target equity weight changes reflect backtested information based on the application of the MVGMMA Index methodology to the S&P 500 Index price data during periods when the MVGMMA Index was not actually published. Please see the important disclosures that are integral to understanding the limitations applicable to the quantitative information in the presentation.

Simply put, based on our research shown above, we expect larger directional market moves following a period when only 1 out of 3 measures is bullish.

It is important to note that this is a limited set of observations where the strategy rebalances to 33% equity, and our expectations are grounded in the recognition that the next signal change would represent a potential transition to either a significantly riskier market environment (i.e. 0 out of 3 measures are bullish) or a more favorable market environment (i.e. 2 out of 3 measures are bullish).

We further observe that the recent shift to 2 out of 3 measures scoring bullish suggests a significant change in volatility expectations.

The chart below shows the annualized volatility for the S&P 500 TR Index based on the strategy’s prevailing aggregate signal since the base date of the MVGMMA Index. Based upon our research, we would expect the market environment to be characterized by meaningfully lower volatility when at least 2 out of 3 measures are bullish, versus when only 1 out of 3 is bullish.

As the chart illustrates, our research suggests that periods when 2 out of 3 measures are bullish, as the strategy is currently positioned, can be characterized by significantly lower market volatility relative to the less favorable environments.

The strategy will continue to apply its objective, rules-based process and weigh the evidence accordingly as we move through November and approach year-end. For a refresher on the strategy’s underlying process, please watch our video here .