HAA 60/40 (NLX Finance’s Hybrid Asset Allocation variant)
NLX Finance's variant of Keller and Keuning's Hybrid Asset Allocation. While both TIPS and US stocks show positive momentum it holds 60% S&P 500 and 40% 7–10 year Treasuries; otherwise it holds the stronger of Treasury bills and those Treasuries, like HAA Simple.
Designed by Nicolas Lequeux (NLX Finance), 2024. Implemented and tracked by Tactfolio.
| May 2008 – Sep 2026 | Strategy | SPY |
|---|---|---|
| Annual return (CAGR) | 8.2% | 11.8% |
| Worst drawdown | -9.5% | -50.7% |
| Sharpe ratio | 1.12 | 0.67 |
| Volatility | 7.3% | 19.7% |
| Annual return since publication (Apr 2024) | 8.0% | 18.4% |
| May 1969 – Sep 2026 | Strategy | SPY |
|---|---|---|
| Annual return (CAGR) | 10.2% | 10.7% |
| Worst drawdown | -11.3% | -55.2% |
| Sharpe ratio | 1.31 | 0.68 |
| Volatility | 7.6% | 17.2% |
| Annual return since publication (Apr 2024) | 8.0% | 18.4% |
HAA 60/40 is a variant of Wouter Keller and JW Keuning's Hybrid Asset Allocation that Nicolas Lequeux proposed on his NLX Finance blog in March 2024. It keeps every rule of HAA Simple but, when the signals are positive, holds 60% S&P 500 and 40% 7–10 year Treasuries instead of stocks alone.
The idea#
HAA uses TIPS, the inflation-protected Treasury fund, as a canary. When TIPS momentum turns negative, rising real yields or inflation are usually hurting both stocks and bonds, and the strategy steps aside. Lequeux's point was that the same signal tells you when a classic stock and bond mix is likely to work. While TIPS are healthy, bonds tend to cushion stock losses, so he keeps a 40% bond sleeve beside the stocks. When TIPS weaken, that cushion is less reliable, and the strategy moves to the defensive side.
The bond sleeve makes the risk-on portfolio much calmer than 100% stocks, which also makes the strategy less sensitive to exactly when the monthly signal flips.
How it works#
At the close of the last trading day of each month:
- Measure 13612U momentum, the average of the 1-, 3-, 6-, and 12-month returns, for TIPS (TIP) and the S&P 500 (SPY).
- If both are positive, hold 60% SPY and 40% 7–10 year Treasuries (IEF), rebalanced to those weights each month.
- Otherwise hold 100% of whichever of Treasury bills (BIL) and IEF has the higher 13612U momentum.
What the backtest shows#
Over the ETF era, from May 2008, HAA 60/40 returned about 8.2% a year, nearly the same as a monthly-rebalanced 60/40 mix at 8.4%. Its worst drawdown was about 10%, less than a third of the 60/40's 31%, and its risk-adjusted return was clearly higher. The S&P 500 returned more, about 12% a year, with a worst drawdown of about half.
It gained 16% from late May to the end of 2008 while stocks lost 34%, and it lost only 2% in 2022, when both stocks and bonds fell. The price of that caution showed in strong years: it made less than 1% in 2009 and 8% in 2013, when the S&P 500 gained 26% and 32%. Its worst drawdown ran from December 2008 to June 2009 and was recovered by November 2009.
Since Lequeux's post in early 2024 it has returned about 8% a year with a worst fall of about 8%.
With simulated history the test starts in 1969 and returns about 10% a year, close to the S&P 500's 11%, with a worst drawdown of about 11% in 1973. It gained in 1974, 2002, and 2008, three of the worst years for stocks. Before TIP existed, a mix of intermediate Treasuries with a little commodity or gold exposure stands in for it.
When it struggles#
- Strong bull markets. With only 60% in stocks it gives up part of every rally, and more when the signal sits on the defensive side.
- Whipsaws. A brief dip in TIPS or stock momentum moves the whole portfolio to bonds or bills.
- Rising rates while risk-on. The 40% Treasury sleeve loses value when yields climb before the canary reacts.
Using it on Tactfolio#
The live strategy above runs these rules exactly, with the same funds as HAA Simple and a monthly rebalance to 60/40. Copy it to try other stock and bond splits, or compare it with the full Hybrid Asset Allocation.
Year by year
| Year | Strategy | SPY |
|---|---|---|
| 2026* | 7.4% | 14.0% |
| 2025 | 7.4% | 17.7% |
| 2024 | 10.2% | 24.9% |
| 2023 | 8.9% | 26.2% |
| 2022 | -2.4% | -18.2% |
| 2021 | 15.0% | 28.7% |
| 2020 | 19.0% | 18.3% |
| 2019 | 12.7% | 31.2% |
| 2018 | 6.6% | -4.6% |
| 2017 | 8.3% | 21.7% |
| 2016 | 8.3% | 12.0% |
| 2015 | 0.9% | 1.2% |
| 2014 | 5.1% | 13.5% |
| 2013 | 8.1% | 32.3% |
| 2012 | 11.1% | 16.0% |
| 2011 | 5.8% | 1.9% |
| 2010 | 3.8% | 15.1% |
| 2009 | 0.7% | 26.4% |
| 2008* | 16.0% | -34.3% |
| Year | Strategy | SPY |
|---|---|---|
| 2026* | 7.4% | 14.0% |
| 2025 | 7.4% | 17.7% |
| 2024 | 10.2% | 24.9% |
| 2023 | 8.9% | 26.2% |
| 2022 | -2.4% | -18.2% |
| 2021 | 15.0% | 28.7% |
| 2020 | 19.0% | 18.3% |
| 2019 | 12.7% | 31.2% |
| 2018 | 6.6% | -4.6% |
| 2017 | 8.3% | 21.7% |
| 2016 | 8.3% | 12.0% |
| 2015 | 0.9% | 1.2% |
| 2014 | 5.1% | 13.5% |
| 2013 | 8.1% | 32.3% |
| 2012 | 11.1% | 16.0% |
| 2011 | 5.8% | 1.9% |
| 2010 | 3.8% | 15.1% |
| 2009 | 0.7% | 26.4% |
| 2008 | 17.9% | -36.8% |
| 2007 | 6.9% | 5.1% |
| 2006 | 11.9% | 15.8% |
| 2005 | 4.1% | 4.8% |
| 2004 | 8.1% | 10.7% |
| 2003 | 16.3% | 28.2% |
| 2002 | 9.1% | -21.6% |
| 2001 | 6.5% | -11.8% |
| 2000 | 6.4% | -9.7% |
| 1999 | 5.8% | 20.4% |
| 1998 | 15.7% | 28.7% |
| 1997 | 24.1% | 33.5% |
| 1996 | 12.5% | 22.5% |
| 1995 | 24.8% | 38.0% |
| 1994 | 3.3% | 0.4% |
| 1993 | 11.0% | 9.7% |
| 1992 | 7.8% | 7.6% |
| 1991 | 23.4% | 30.3% |
| 1990 | 1.8% | -3.2% |
| 1989 | 25.5% | 31.5% |
| 1988 | 1.8% | 16.4% |
| 1987 | 22.0% | 5.1% |
| 1986 | 19.5% | 18.6% |
| 1985 | 30.4% | 31.6% |
| 1984 | 7.5% | 6.2% |
| 1983 | 14.6% | 22.4% |
| 1982 | 37.4% | 21.6% |
| 1981 | 3.7% | -4.9% |
| 1980 | 15.9% | 32.4% |
| 1979 | 8.4% | 18.3% |
| 1978 | 2.3% | 6.5% |
| 1977 | -4.2% | -7.2% |
| 1976 | 20.9% | 23.8% |
| 1975 | 9.4% | 37.1% |
| 1974 | 7.9% | -26.5% |
| 1973 | -10.1% | -14.7% |
| 1972 | 12.4% | 18.9% |
| 1971 | 12.5% | 14.1% |
| 1970 | 8.4% | 3.9% |
| 1969* | 4.1% | -10.4% |
* 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.
- StrategyNLX HAA 60/40
- WeightEqual
- IfAll of 2 conditions
- 1/3/6/12-month unweighted momentum of TIP is above 0
- 1/3/6/12-month unweighted momentum of SPY is above 0
Then- WeightSpecified
- TickerSPY60%
- TickerIEF40%
Otherwise- WeightEqual
- RankTop 1 · 1/3/6/12-month unweighted momentum
- TickerBIL
- TickerIEF
- RankTop 1 · 1/3/6/12-month unweighted momentum
- IfAll of 2 conditions
- WeightEqual
Sources and caveats
- NLX Finance (Nicolas Lequeux), The HAA strategy revisited (2024)
- Wouter Keller and JW Keuning, Dual and Canary Momentum with Rising Yields/Inflation: Hybrid Asset Allocation (2023)
- Keeps HAA Simple's rules and funds (13612U momentum on TIP, SPY, IEF, and BIL) and changes only the risk-on holding to 60% SPY and 40% IEF, rebalanced monthly, as the source describes.
- NLX Finance shows its test period only in charts; the development window assumes it starts with IEF's daily history in 2002, which the author used to extend TIP.
- Signals and trades use the close of the last trading day of each month, as in the source.
Common questions#
What is HAA 60/40?#
It is NLX Finance's 2024 variant of Keller and Keuning's Hybrid Asset Allocation. It holds 60% SPY and 40% IEF while TIPS and SPY both have positive momentum, and otherwise the stronger of BIL and IEF.
How is HAA 60/40 different from HAA Simple?#
The signals and the defensive side are identical. HAA Simple holds 100% SPY when risk is on; HAA 60/40 holds 60% SPY and 40% IEF.
Is HAA 60/40 better than a regular 60/40 portfolio?#
In the ETF-era test it earned about the same return as a buy-and-rebalance 60/40 with a much smaller worst drawdown. It moves the whole portfolio when the signals flip, and it can lag when the canary gives a false alarm.
What ETFs does HAA 60/40 use?#
SPY and IEF when risk is on, TIP and SPY as the signals, and BIL or IEF when risk is off.