Dual Momentum Sector Strategy - Use AGG or BIL as Bond proxy?

[Begbie00]

Hi all,

I'm using ETFs to implement Gary Antonacci's "Dual Momentum", which relies upon a signal comparing US equities (SPY, etc.) to "Bonds".

He mentions the Barclays US Aggregate Index (in my view, most similar to AGG) but uses BIL in a chart showing performance. If I'm not mistaken, BIL is a short-term 1-3M T-Bill fund, more like money market than bonds (i.e., insulated from inflation risk, very low chance of value loss.).

For anyone using Dual Momentum and ETFs to implement a sector strategy: should I be comparing SPY against AGG or BIL to figure out if I should be in equities?

Thanks.

 

[GlobalMacro90]

First of all, fantastic strategy. I use a similar variation with some of my money.

This is a design decision and no "right" answer, but I use AGG bonds. A little longer duration and a (very) little credit risk compared to T Bills. AGG will typically have a higher trailing return, so a higher bar for the risk asset to overcome.

This makes sense to me, but again it's a design decision. If you think rates will continue to rise (I don't) then maybe BILL is better since its duration is lower and will offer more capital preservation in a rising rate environment.