Monthly Momentum in S&P 500 and Treasury Bonds (Bond Rotation Strategy in SPY and TLT)

The SPY and TLT rotation trading strategy might work well because TLT often works as a safe haven when the stock market is weak. Below you find the logic and code for this simple SPY and TLT momentum/rotation strategy. The drawdown is low but the total return is better than “buy and hold”.

Here we look at a similar ETF sector momentum/rotation strategy but we exclude EEM: A SPY and TLT strategy (S&P 500 and 20 years Treasury bond).

We backtest the following trading rules:

* It’s based on monthly quotes in the ETFs SPY and TLT.

* Every month rank both based on last month’s performance/momentum.

* Go long the one with the best performance the prior month.

* Hold for one month and repeat (or continue being long the same instrument).

The rules are simple. Obviously, this strategy is best performed in a tax-deferred account, but without slippage and taxes, the equity curves look like this from 2003 until today (shown in the below image)

We have shared the Amibroker code for rotation/momentum strategy here >>

https://www.quantifiedstrategies.com/spy-tlt-bond-rotation-strategy/