Our loss-avoiding algorithms based on our Market Resilience Index® series have produced strong results, as evidenced by the performance of the green line in the figure below. This line is a simulation of the performance produced by trading long and short positions in the Dow Jones Industrial Average index based on our MRI-driven algorithms.
The performance of the DJIA (buy-and-hold) is indicated by the brown line. The figure shows from 1918 through early 2023.
The algorithms include rules related to price trend, MRI, and return reversal. They were calibrated on the period from 1918 through 2006.
The vertical line in the chart represents the latest date of the data used to calibrate the algorithms (the in-sample period). The out-of-sample period extends from January 2007 through most recent time period shown. Our loss-avoiding algorithms were completed in 2008 and have consistently produced strong returns since that time.
The key message of this chart is that the MRI are relevant to avoiding losses in the stock market.
Performance after 2008 indicates how the algorithms performed without any intervention or adjustment. There is an average of 11 trades per year over the period shown, with trades clustered (e.g., a "buy" trade is followed the next week by a "sell" trade) near major market inflection points. The de-clustering of trades during these times requires intervention.
The clustering of trades at major market inflection points led to our research into ways to reduce trading during these stressful periods. The result of that research is the Risk Tolerance Driver (RTD) series for the US equity market.
We do not currently offer model portfolios that contain short positions.