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”.
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 as shown below from 2003 until today.
You can find more info about this trading strategy here:
https://www.quantifiedstrategies.com/spy-tlt-bond-rotation-strategy/