200-Day Moving Average Strategy (S&P 500)

May 2007 – Sep 2026	Strategy	SPY
Annual return (CAGR)	8.3%	10.7%
Worst drawdown	-21.5%	-55.2%
Sharpe ratio	0.73	0.62
Volatility	11.9%	19.7%
Annual return since publication (Mar 2016)	11.8%	15.6%

Jan 1960 – Sep 2026	Strategy	SPY
Annual return (CAGR)	10.2%	10.6%
Worst drawdown	-25.8%	-55.2%
Sharpe ratio	0.93	0.70
Volatility	11.0%	16.4%
Annual return since publication (Mar 2016)	11.8%	15.6%

The 200-day moving average rule is one of the most widely watched trend-following signals. Jeremy Siegel described it in Stocks for the Long Run (1994), and Michael Gayed and Charles Bilello tabulated the plain daily version in their 2016 paper "Leverage for the Long Run". Hold the S&P 500 while it closes above its average of the last 200 daily closes, and Treasury bills while it closes below.

The idea#

The worst stretches for stocks have mostly happened below the 200-day average, where volatility also tends to be higher. The rule does not try to call tops or bottoms. It accepts selling after a decline has started and buying back after a rebound has begun, in exchange for sitting out the middle of long bear markets.

As Siegel and the paper both note, the main benefit is lower risk rather than higher return. In strong bull markets the rule usually lags, because every false alarm costs a little.

How it works#

At the close of every trading day:

Compare the S&P 500 (SPY) with its 200-day simple moving average.
If SPY closes above its average, hold SPY.
Otherwise, hold Treasury bills (BIL).

Siegel's version waits until the index is 1% above or below the average before switching; this page tests the plain rule without that band.

What the backtest shows#

With real prices the test starts in mid-2007. Since then the rule returned about 8% a year, against about 11% for the S&P 500 and 8% for a 60/40 portfolio. Its worst drawdown was about 22%, far smaller than the S&P 500's 55% and the 60/40 portfolio's 33%, but on risk-adjusted return it only matched the 60/40 portfolio, finishing just below it.

Its best year relative to the market was 2008, which it ended down about 3% while the S&P 500 lost 37%. The cost shows up in choppy years. It lost 13% from June to December 2007 while the market slipped 3%, and 10% in 2011 while the market gained 2%. Its worst drawdown, about 22%, came from April to September 2010, when the S&P 500 crossed its average again and again; it did not recover until March 2013. It also lagged in quick V-shaped rebounds, gaining about 16% in 2019 and 9% in 2020 against 31% and 18% for the market.

Since the paper appeared in early 2016 it has returned about 12% a year, with a clearly better risk-adjusted return than over the whole period.

With simulated history the test starts in 1960. Over that span it returned about 10% a year, close to the S&P 500's 10.5%, with a much better risk-adjusted return and a worst drawdown of about 26% against 55%. It gained 8% in 1974, when the market fell by a quarter, and 21% in 1987, when it stepped aside before the October crash. Its worst simulated drawdown ran from mid-1999 to April 2003.

When it struggles#

Sideways markets. When prices hover around the average, a daily check produces many small losses from buying high and selling low.
Fast crashes and rebounds. A fall of a few weeks can be over before the signal turns, and the rebound can be well underway before it turns back.
Strong bull markets. Any false alarm in a rising market leaves money on the table.

Using it on Tactfolio#

The live strategy runs the plain rule each day on SPY and BIL. Copy it to add a band around the average, try a different length, or compare it with Faber's monthly 10-month version, which checks only once a month.

Year by year

Year	Strategy	SPY
2026*	9.3%	14.0%
2025	12.1%	17.7%
2024	24.9%	24.9%
2023	14.7%	26.2%
2022	-15.0%	-18.2%
2021	28.7%	28.7%
2020	9.4%	18.3%
2019	16.3%	31.2%
2018	-1.2%	-4.6%
2017	21.7%	21.7%
2016	10.3%	12.0%
2015	-5.2%	1.2%
2014	11.5%	13.5%
2013	32.3%	32.3%
2012	13.1%	16.0%
2011	-10.2%	1.9%
2010	-1.8%	15.1%
2009	22.5%	26.4%
2008	-2.8%	-36.8%
2007*	-13.3%	-3.4%

Year	Strategy	SPY
2026*	9.3%	14.0%
2025	12.1%	17.7%
2024	24.9%	24.9%
2023	14.7%	26.2%
2022	-15.0%	-18.2%
2021	28.7%	28.7%
2020	9.4%	18.3%
2019	16.3%	31.2%
2018	-1.2%	-4.6%
2017	21.7%	21.7%
2016	10.3%	12.0%
2015	-5.2%	1.2%
2014	11.5%	13.5%
2013	32.3%	32.3%
2012	13.1%	16.0%
2011	-10.2%	1.9%
2010	-1.8%	15.1%
2009	22.5%	26.4%
2008	-2.8%	-36.8%
2007	-5.6%	5.1%
2006	9.6%	15.8%
2005	-5.4%	4.8%
2004	3.3%	10.7%
2003	20.1%	28.2%
2002	-5.9%	-21.6%
2001	3.3%	-11.8%
2000	-16.3%	-9.7%
1999	12.1%	20.4%
1998	18.4%	28.7%
1997	33.5%	33.5%
1996	19.1%	22.5%
1995	38.0%	38.0%
1994	-6.6%	0.4%
1993	9.7%	9.7%
1992	6.9%	7.6%
1991	25.3%	30.3%
1990	-8.7%	-3.2%
1989	31.5%	31.5%
1988	8.8%	16.4%
1987	20.7%	5.1%
1986	18.6%	18.6%
1985	31.6%	31.6%
1984	6.4%	6.2%
1983	22.4%	22.4%
1982	30.9%	21.6%
1981	-2.9%	-4.9%
1980	29.6%	32.4%
1979	14.4%	18.3%
1978	-0.8%	6.5%
1977	-6.1%	-7.2%
1976	19.3%	23.8%
1975	22.1%	37.1%
1974	8.0%	-26.5%
1973	-9.2%	-14.7%
1972	18.9%	18.9%
1971	12.3%	14.1%
1970	16.7%	3.9%
1969	-3.7%	-8.4%
1968	10.7%	10.9%
1967	20.1%	23.8%
1966	-3.5%	-10.1%
1965	7.2%	12.4%
1964	16.4%	16.4%
1963	22.7%	22.7%
1962	-0.1%	-8.8%
1961	26.8%	26.8%
1960*	-0.3%	0.4%

* Partial year.

The rules as implemented

This is the exact tree Tactfolio runs, rebalanced daily with signals and trades at the close. Open it to inspect or copy it.

Sources and caveats

Follows the plain rule tabulated by Gayed and Bilello (Table 6). Siegel's version adds a 1% band around the average before switching; it is not used here.
SPY stands in for the S&P 500 total return index and BIL for 3-month Treasury bills.
Signals and trades use each day's close.

Common questions#

What is the 200-day moving average strategy?#

It is a trend-following rule: hold the S&P 500 while it closes above its average price of the last 200 trading days, and move to Treasury bills while it closes below.

Does the 200-day moving average strategy beat buy and hold?#

Not on return in most periods tested here. Since 2007 it returned less than the S&P 500 but with far smaller drawdowns, and in simulated history since 1960 it nearly matched the market's return with much lower risk.

What is the difference between the 200-day moving average and the 10-month moving average?#

They measure nearly the same trend, since ten months is about 210 trading days. The 200-day rule is checked every day, while Faber's 10-month rule is checked only at month end, which means fewer trades but slower reactions.

Can you use leverage with the 200-day moving average?#

Yes. Gayed and Bilello's Leverage Rotation Strategy holds a two- or three-times leveraged S&P 500 fund above the average instead of the index itself.