D.A.A.
Defensive
Asset Allocation
Two bellwether assets decide when to take cover
DAA introduces the canary-universe idea: a tiny two-asset bellwether basket — emerging-market equities (VWO) and total US bonds (BND) — sits outside the main 12-asset risky universe and acts purely as a regime gate. Each month, count how many of the two canaries have non-positive 13612W momentum.
Zero bad canaries → fully offensive (top six risky assets at 1/6 each). One bad canary → half-defensive (three risky + half cash). Two bad canaries → fully defensive (single best cash asset, IEF/SHY/LQD). The breadth count, not the individual scores of the risky assets, drives the offensive/defensive split — that is the breadth-momentum innovation.
Paper · Breadth Momentum and the Canary Universe: Defensive Asset Allocation (DAA) — 2018
Backtested results do not predict future returns.
DAA-G12 (T=6, B=2), as reported in the source paper (Fig. 8). The fall is measured at month-end — within a month it ran deeper.