As mentioned in our recent blog posts, it’s time to launch our new Maestro Strategy that brings together the three key elements we wrote about last week: a classic buy-n-hold approach, the slow-trading Adagio Strategy (as illustrated in the image below), and our existing Forte Strategy which has proven useful for hedging purposes and to intensify returns during periods of low volatility.
Adagio Strategy Sells on Increase Volatility and Buys Back as Volatility Starts to Decline
Our portfolio analysis has shown that an allocation of 40% to the buy-n-hold approach, 30% to the Adagio Strategy, and 30% to the Forte Strategy provides the optimal trade-off between gains, while keeping drawdowns to less than 15%. For now, we’ll use the simple SPY S&P 500 tracking ETF for the buy-n-hold allocation and the QQQ Nasdaq-100 tracking ETF for the Adagio strategy. The Forte Strategy will continue as is with the TQQQ 3X Nasdaq-100 tracking ETF and the VIX// UVXY volatility hedging ETFs.
The graph below shows the comparison between the S&P 500 and the new (theoretical) Maestro Strategy from January 1, 2018 through the end of 2020.
The following table and graphs compare the Maestro Strategy base case study period from January 2018 through August 2020 to the S&P 500 and the Maestro Strategy actual performance for an out-of-sample time period modeled since the end of the optimization studies in September 2020.
We’ll update and continue to evolve this reporting format on a weekly basis in 2021 to compare actual performance of the Maestro Strategy to both the original base case and the S&P 500. We’ll also continue to report on the three separate strategies (Forte, Adagio, and Maestro) for comparison and track the results available on the Collective2 website for each of the strategies.
Forte Strategy Update
The Forte Strategy ended the year up 3.7% versus 16.3% for the S&P 500 while our drawdown was contained at 9.5% compared to 33.9% for the S&P 500. The correlation to the general market remained low at 0.137. We outlined several limitations with the Forte Strategy in our blog from last week and have set up two new C2 strategies (Adagio and Maestro) so subscribers can also have direct access to these strategies for linked accounts. Admittingly, 2020 was a disappointing year. We’ve learned from the last several months, gaining further insights, performing a wider spectrum of research and developing new methods as we’ve outlined. We’re optimistic for 2021 and wish you and your families strong health and prosperity in the coming year.
More details about our trading activity can be found by registering on the Collective2 website and searching for Forte Strategy. A running list of these email blogs and general information about Maestro Capital Research can be found at maestrocapitalresearch.com.