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Below are the results of a quick backtest on PortfolioVisualizer of a dual momentum fixed income approach (DMFI) as proposed by Antonacci in the Dual Momentum book, aligned with the GEM model.
Summary - better than straight bond allocation in a 60/40.

Performance Summary
Performance statistics for the timing portfolio and benchmark portfolios
Portfolio	                Initial	Final	CAGR	Stdev	Bestyr	Worstyr	MaxDD  Sharpe	Sortino	Correl               

Dual Momentum Model	        $10,000	$17,759	4.06%	4.85%	14.20%	-4.24%	-10.58% 0.70	1.09	0.37
Equal Weight Portfolio	        $10,000	$15,035	2.87%	3.66%	10.95%	-9.18%	-11.62% 0.60	0.90	0.65
Vanguard Total Bond Market ETF	$10,000	$13,858	2.29%	4.17%	8.83%	-13.11%	-17.28% 0.40	0.57	0.24

Fixed income assets used, as suggested by Antonacci: JNK (Hi yield), MBB (mortgage backed securities ETF), GBF (govt/credit bonds ETF), BIL (3 mo treasury ETF).
Benchmark: BND
Time period: 12/2008-present
Lookback: 12 months (Antonacci's standard)
Ranking/Trading: monthly, at next close after month end
Risk-free asset: cash

Apparently Antonacci focused on the intermediate-term bond market, avoided the long term Treasuries in his pre-selected approach. Fortuitous call, as the 20+ years (as represented by TLT) got crushed in the last year after a long run of outperformance prior as interest rates dropped to 0.

I prefer shorter look-backs than is normal for research purposes.

Same set-up as FlyingCircus, but a 4-month look back (roughly what I use for equity ETFs), produces a CAGR of 6.87%, Sharpe .94, and a Sortino of 2.09(!).

Baltassar

"Summary - better than straight bond allocation in a 60/40".

Not sure if I understand the backtest period.
How does it compare to a diversified target fund?

AOR	ISHARES CORE GROWTH ALLOCATION ETF		
IUSB	iShares Core Total USD Bond Market ETF	33.98%	Bonds
IVV	iShares Core S&P 500 ETF	32.45%	Equity
IDEV	iShares Core MSCI International Developed Markets ETF	18.23%	Equity
IEMG	iShares Core MSCI Emerging Markets ETF	6.32%	Equity
IAGG	iShares Core International Aggt Bd ETF	6.09%	Bonds
IJH	iShares Core S&P Mid-Cap ETF	1.93%	Equity
IJR	iShares Core S&P Small-Cap ETF	0.83%	Equity
	BlackRock Cash Funds Treasury SL Agency	0.18%	Bonds
			
		40.25%	Bonds
		59.75%	Equity

Month-End Average Annual Total Returns	
AS OF 05/31/2023	Market Return
1 Year	0.200
3 Year	5.130
5 Year	4.490
10 Year	5.720
Life	7.59

GD_

I think the idea is that you actively manage the bond allocation among different categories of bonds, rather than simply rebalancing within an unchanging mix of bond funds. The equity allocation isn't considered, but could presumably be managed on the same basis ("dual momentum").


Baltassar

actively manage the bond allocation among different categories of bonds,

Correct - that was Antonacci's thought. I'm playing around with backtesting around using preferreds as part of the mix, although for transparency I've been brute forcing the two with the best dual momentum of JNK, IEF, PFF and BND for a few years (BIL as the absolute momentum benchmark).

4 months lookback it is! Much less drawdown, much better return. Thanks Baltassar!

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