Growth-Value Style Selection compounded at +29.5% a year from 2016-10-24 to 2026-10-05, with a worst drawdown of -35.0% (high drawdown). It ranks 5 of 6 re-run strategies by drawdown, shallowest first.
The rule in one line: The strategy uses eleven S&P 500 sector ETFs only as signals; it does not hold them.
| Worst drop (max drawdown) | -35.0% |
|---|---|
| Yearly growth (CAGR) | +29.5% |
| Return per unit of risk (Sharpe) | 0.97 |
| Total return | +1211.9% |
| S&P 500 (SPY), same period | +322.2% |
| Return ÷ drawdown | 0.84 |
| Period | 2016-10-24 – 2026-10-05 (9.9 years) |
| Risk tier | High drawdown |
| Drawdown rank | 5 / 6 |
Backtest = historical simulation on past prices, not real trading.
Equity curve of a $10,000 start, with SPY dashed.
The strategy uses eleven S&P 500 sector ETFs only as signals; it does not hold them. On the first trading day of each month it uses completed closes, trading at the next open. It measures each sector's return over roughly the past year excluding the latest month, and how much its price has varied over 100 days. Sectors that are both among the weakest 30% and the most variable 30% are set aside. The remaining growth sectors (technology, consumer discretionary, communication services) and value sectors are averaged, and the style with the higher average wins.
If SPY is above its 200-day average and has not fallen more than 8% in five days, the strategy holds one leveraged ETF: the best of TQQQ, UPRO and SPXL when growth leads, or of UPRO and SPXL when value leads, ranked by blended one-, three- and six-month returns relative to volatility. Its size is 18% divided by the recent volatility of the two strongest sectors in that style, capped at 100%, with the rest in short Treasuries (SHY). Otherwise it holds the one or two strongest of TLT, GLD and SHY.
Daily safeguards switch to defensive assets if the fund falls 16% from its high, the account drops 15% from its peak, or SPY falls 8% in a week. A 20% loss since January keeps it defensive until year-end.
| Universe | Signals only: XLK, XLY, XLC (growth); XLF, XLI, XLE, XLB, XLP, XLU, XLV, XLRE (value). Traded: TQQQ, UPRO, SPXL; defensive: TLT, GLD, SHY; benchmark: SPY. |
|---|---|
| Rebalancing | Monthly on the first trading day; re-enters at once when the market turns positive while out of leverage. Stops, breakers and the annual loss lock are checked daily. |
| Execution | Signals use completed daily closes only; orders fill at the next session's open and positions are marked at the close. |
| Trading costs | 0.25% per side on every dollar bought or sold (about 0.50% for a full switch). No separate slippage or spread model. |
| Leverage | One 3x ETF (TQQQ, UPRO or SPXL), sized at 18% divided by sector volatility and capped at 100%; remainder in SHY. No margin is used. |
| Risk controls | Fund 16% below its high, account down 15%, or SPY down 8% in five days: defensive, five-day lock until SPY tops its 50-day average. Down 20% since January: defensive until year-end. |
| Price data | Public daily price data adjusted for dividends and splits (open rescaled to match). Cash-like ETFs earn their adjusted market return. |
| Known limitations | Up to 100% in a single 3x fund. The annual loss lock stays defensive for the rest of the year regardless of conditions. Hand-picked ETFs; parameters chosen on the same 10-year window. |
Across the 9 full calendar years in the test, the strategy beat SPY in 5. Its best year was 2020 (+103.6% against SPY's +18.3%) and its weakest was 2022 (-21.4% against -18.2%). It finished 2 full years with a loss (2018, 2022). In 2018, when SPY fell 4.6%, the strategy returned -10.9%. In 2022, when SPY fell 18.2%, the strategy returned -21.4%.
SPY fell more than 10% from a high 3 times in this window (2018-09-20 to 2018-12-24: SPY -19.4%, strategy -19.5%; 2020-02-19 to 2020-03-23: SPY -33.7%, strategy -14.3%; 2022-01-03 to 2022-10-12: SPY -24.5%, strategy -22.8%). The strategy lost less than the index in 2 of 3 of those declines, so the protection was not consistent.
Labelled by SPY's trend (above a rising 200-day average = uptrend, below a falling one = downtrend, anything else = sideways), the strategy averaged an annualized +38.1% on uptrend days (79% of the test) against SPY's +23.4%, so it kept pace with or beat the index in steady rising markets. On sideways days (8%), which is where trend breaks and the first leg of sell-offs land, it averaged -9.1% against SPY's -77.2%; on downtrend days (10%), which include the sharp rebounds inside bear markets, -4.6% against +27.1%. Its losses were most concentrated in uptrend stretches: 90% of all losing-day losses came on 79% of the days.
On days SPY rose, the strategy captured 162% of the index's gains; on days SPY fell, it took 156% of the index's losses, an amplified profile that moved more than the index in both directions. 66% of months ended positive; the best month was 2020-08 (+30.5%) and the worst was 2018-02 (-21.5%).
The deepest drawdown on the daily curve ran from a peak on 2018-01-26 to a trough on 2018-04-24 (about 3 months of decline), a fall of -35.0%. Over the same stretch SPY returned -7.9%, so the loss came while the market itself was falling. It regained the previous high on 2020-01-08, about 23 months after the peak.
| Year | Strategy | SPY | Difference |
|---|---|---|---|
| 2016 (partial) | +9.0% | +4.6% | +4.4% |
| 2017 | +59.6% | +21.7% | +37.9% |
| 2018 | -10.9% | -4.6% | -6.3% |
| 2019 | +30.8% | +31.2% | -0.4% |
| 2020 | +103.6% | +18.3% | +85.3% |
| 2021 | +71.0% | +28.7% | +42.3% |
| 2022 | -21.4% | -18.2% | -3.2% |
| 2023 | +47.1% | +26.2% | +20.9% |
| 2024 | +19.5% | +24.9% | -5.4% |
| 2025 | +38.4% | +17.7% | +20.7% |
| 2026 (partial) | -4.2% | +14.5% | -18.7% |
| Peak | Trough | Recovered | Fall | SPY, peak to trough |
|---|---|---|---|---|
| 2018-01-26 | 2018-04-24 | 2020-01-08 | -35.0% | -7.9% |
| 2021-12-29 | 2023-03-10 | 2023-06-13 | -29.9% | -17.9% |
| 2025-10-29 | 2026-03-26 | not yet | -29.6% | -5.6% |
| SPY trend | Share of days | Strategy, annualized average | SPY, annualized average |
|---|---|---|---|
| Uptrend | 79% | +38.1% | +23.4% |
| Sideways | 8% | -9.1% | -77.2% |
| Downtrend | 10% | -4.6% | +27.1% |
Computed from the daily equity curve of the same re-run (2016-10-24 to 2026-10-05). Trend labels classify each day after the fact (SPY above a rising 200-day average = uptrend, below a falling one = downtrend, otherwise sideways); they describe the past and are not a trading signal. Annualized averages are the mean daily return in that group times 252.
The worst peak-to-trough fall was -35.0%: a $10,000 account would have dropped to about $6,503 at that point before recovering. The +29.5% CAGR is the annual rate that compounds the start value into the end value over 9.9 years; the return-to-drawdown ratio of 0.84 says how many points of annual return each point of worst-case loss bought. Compare strategies on that pair, not on CAGR alone.
Re-run on 2026-10-07 with the strategy's current code on historical prices — a systematic take on Style Investing. Numbers change when the strategy is re-run on newer data. The full write-up explains the rules.
All strategy backtests, lowest drawdown first
Disclosure. Backtests are hypothetical simulations on historical data. They do not include every real-world cost, are not live results, and do not guarantee future returns. Educational research only, not investment advice.