A few months ago I implemented the SPY-UI model on the P123 platform. It has recently exited it’s incubation period and is now available for FREE on P123 once you are a member. If you’re not a member you can use my P123 link for a free trial. It is available to all subscription levels. I’ll review the model again here and provide some important details on the P123 model.
I first discussed the SPY-UI model in this post. If you really want to dive into the historical details of SPY-UI model then you need to read the Philo Econ post on the model – where I first read about it. The historical backtest goes back to 1930. I’ve run my own model based on the FRED data back to 1948 and show similar impressive results over buy and hold – higher returns and lower drawdowns.
Note: the SPY-COMP model I presented recently gives better results using a similar yet broader set of economic signals. Those signals are not available on P123 thus the model is not implementable on that platform.
The SPY-UI model as implemented on P123 is as follows.
- If the unemployment rate is below it’s 12 month simple moving average (SMA), the model is 100% invested in SPY.
- If the unemployment rate is above it’s 12 month SMA, the the model checks the SPY vs it’s 200 day SMA. If the SPY is above the 200 day SMA the model remains invested in SPY. If the SPY is below it’s 200 day SMA the model switches to an investment in intermediate government bonds (IEF).
- The signals are checked every 4 weeks (not necessarily at the end of the month).
The portfolio backtest results on P123 are below. The backtest goes back only to 2002 due to the short history of the IEF ETF.
During this period the portfolio statistics were as follows.
Not bad for such a simple model. This is also the most basic use of the SPY-UI signal. As I discussed in other posts (here and here) you can use this signal in TAA strategies as well as quant strategies.
A few implementation details. I chose the SPY and IEF ETFs because they are the best known and most widely used ETFs for the SP500 and Intermediate Government Bond categories. It doesn’t mean you should necessarily use those for implementation. It depends on your brokerage. For example, I would use IVV or VTI for the stock component and VGIT for the bond component due to their lower fees and no-commission status at my brokerages. Also, as with any TAA model trade execution is important to minimize slippage and tracking error.
In summary, the simple yet powerful SPY-UI model is now available as a designer model on P123. I will keep updating the model’s signals here as well.
Full Disclaimer - Nothing on this site should ever be considered advice, research or the invitation to buy or sell securities. These are my personal opinions only.