Bold Asset Allocation (BAA)

Wouter Keller's Bold Asset Allocation, balanced version. Four canaries (US, developed, and emerging stocks and US bonds) decide the regime. While all four have positive momentum it holds the six strongest of twelve asset classes; if any weakens it holds the three strongest defensive funds, using Treasury bills for any that trail them.

Designed by Wouter Keller, 2022. Implemented and tracked by Tactfolio.

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1×2×3×5×20082012201620202024
Growth of $1, log scale. Strategy SPY. Hypothetical results on daily ETF prices with trading costs, through Sep 2026.
Jul 2008 – Sep 2026StrategySPY
Annual return (CAGR)9.0%12.6%
Worst drawdown-12.8%-47.2%
Sharpe ratio0.910.70
Volatility10.1%19.7%
Annual return since publication (Aug 2022)6.1%18.0%

Bold Asset Allocation (BAA) is a monthly strategy published in 2022 by Wouter Keller. It combines the fast crash detection of his earlier canary strategies with a slower momentum measure for choosing holdings. It also adds a new rule for rising interest rates, when bonds stop being a safe place to hide.

The idea#

Keller's earlier strategies used one fast momentum score for everything. BAA splits the jobs:

  • The canary uses fast momentum. Four canaries are measured with the quick-reacting 13612W score, which gives the strategy an early warning.
  • The picks use slow momentum. Holdings are chosen by "SMA12" momentum: today's price relative to its average over the last 13 month-ends. This is steadier, so the strategy trades less.

The second change came from 2022. When rates rise, long bonds can fall as hard as stocks, so BAA's defensive side holds a mix including TIPS and commodities. Any defensive pick that is weaker than Treasury bills is swapped for Treasury bills.

How it works#

At the close of the last trading day of each month:

  1. Check the canaries. Measure 13612W momentum for SPY, VWO, VEA, and BND (US, emerging, and developed stocks, and US bonds).
  2. If all four are positive (offensive): hold the six strongest of twelve funds by SMA12 momentum, equally weighted. The twelve are SPY, QQQ, IWM, VGK, EWJ, VWO, VNQ, DBC, GLD, TLT, HYG, and LQD.
  3. If any canary is zero or negative (defensive): rank TIP, DBC, BIL, IEF, TLT, LQD, and BND by SMA12 momentum. Hold the top three at a third each, replacing any that trail BIL with BIL.

This page covers the balanced version, BAA-G12. Keller also published an aggressive version, BAA-G4, that holds a single fund while offensive. It did not meet our listing bar over the ETF era.

What the backtest shows#

Over the ETF era BAA-G12 had one of the highest risk-adjusted returns of the classic strategies we track, and the shallowest worst drawdown among them. It gained in 2008 and was about flat in 2022, when both stocks and bonds fell.

The paper is recent, so its record since publication is short. Since August 2022 it has trailed a strong stock market by a wide margin, and its risk-adjusted return has been well below a 60/40 mix's. A few years is too short to judge a monthly strategy, which is why the live record matters here.

When it struggles#

  • Fast rebounds after a scare. One weak canary is enough to go fully defensive, and the strategy can stay there while stocks recover.
  • Long, steady bull markets. Twelve diversified assets will trail a market led by US large-cap stocks.

Using it on Tactfolio#

The live strategy above runs these rules on daily data, including the Treasury bill replacement rule. Open it to see how the defensive branch is built, or copy it and try your own defensive universe.

Year by year

YearStrategySPY
2026*11.1%14.0%
20258.6%17.7%
20243.3%24.9%
20236.6%26.2%
20221.1%-18.2%
20217.9%28.7%
202017.1%18.3%
201910.5%31.2%
20187.2%-4.6%
201715.0%21.7%
20165.2%12.0%
2015-1.8%1.2%
20145.4%13.5%
20138.3%32.3%
20128.6%16.0%
20116.5%1.9%
201014.2%15.1%
200923.9%26.4%
2008*7.6%-27.1%

* Partial year.

The rules as implemented

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

  • StrategyKeller BAA-G12
    • WeightEqual
      • IfAll of 4 conditions
        • 1/3/6/12-month weighted momentum of SPY is above 0
        • 1/3/6/12-month weighted momentum of VWO is above 0
        • 1/3/6/12-month weighted momentum of VEA is above 0
        • 1/3/6/12-month weighted momentum of BND is above 0
        Then
        • WeightEqual
          • RankTop 6 · 13-point relative SMA momentum
            • TickerSPY
            • TickerQQQ
            • TickerIWM
            • TickerVGK
            • TickerEWJ
            • TickerVWO
            • TickerVNQ
            • TickerDBC
            • TickerGLD
            • TickerTLT
            • TickerHYG
            • TickerLQD
        Otherwise
        • WeightEqual
          • IfAt least 2 of 6 conditions
            • 13-point relative SMA momentum of TIP is above 13-point relative SMA momentum of BIL
            • 13-point relative SMA momentum of DBC is above 13-point relative SMA momentum of BIL
            • 13-point relative SMA momentum of IEF is above 13-point relative SMA momentum of BIL
            • 13-point relative SMA momentum of TLT is above 13-point relative SMA momentum of BIL
            • 13-point relative SMA momentum of LQD is above 13-point relative SMA momentum of BIL
            • 13-point relative SMA momentum of BND is above 13-point relative SMA momentum of BIL
            Then
            • WeightEqual
              • RankTop 3 · 13-point relative SMA momentum
                • TickerTIP
                • TickerDBC
                • TickerBIL
                • TickerIEF
                • TickerTLT
                • TickerLQD
                • TickerBND
            Otherwise
            • WeightEqual
              • IfAt least 1 of 6 conditions
                • 13-point relative SMA momentum of TIP is above 13-point relative SMA momentum of BIL
                • 13-point relative SMA momentum of DBC is above 13-point relative SMA momentum of BIL
                • 13-point relative SMA momentum of IEF is above 13-point relative SMA momentum of BIL
                • 13-point relative SMA momentum of TLT is above 13-point relative SMA momentum of BIL
                • 13-point relative SMA momentum of LQD is above 13-point relative SMA momentum of BIL
                • 13-point relative SMA momentum of BND is above 13-point relative SMA momentum of BIL
                Then
                • WeightSpecified
                  • RankTop 1 · 13-point relative SMA momentum33.33%
                    • TickerTIP
                    • TickerDBC
                    • TickerBIL
                    • TickerIEF
                    • TickerTLT
                    • TickerLQD
                    • TickerBND
                  • TickerBIL66.67%
                Otherwise
                • WeightEqual
                  • TickerBIL

Sources and caveats

  • Offensive universe of twelve with top 6, defensive universe TIP, DBC, BIL, IEF, TLT, LQD, BND with top 3, as in the source.
  • In the defensive half, any pick with weaker SMA12 momentum than BIL is replaced by BIL, as in the source.
  • Signals and trades use the close of the last trading day of each month, as in the source.

Common questions#

What is Bold Asset Allocation?#

It is a monthly tactical strategy by Wouter Keller (2022). Four canaries with fast 13612W momentum decide between an offensive and a defensive universe, and slower SMA12 momentum picks the holdings in each.

What does SMA12 momentum mean?#

It is the current price divided by the average of the last 13 month-end prices, minus one. It changes more slowly than a weighted 1-to-12-month return, which reduces trading.

What is the difference between BAA-G12 and BAA-G4?#

BAA-G12 holds six of twelve funds while offensive. BAA-G4 holds only the single strongest of QQQ, VWO, VEA, and BND. Both share the same canaries and defensive side.

Why does BAA hold BIL?#

In the defensive universe, any selected fund whose momentum is weaker than Treasury bills (BIL) is replaced by BIL. This avoids holding bonds that are losing value when rates rise.