Earnings Acceleration Stock Index (EASI)


The System is based on two parts

Stock Selection: (The first part)
This is based on the study of biggest past stock market winners. The philosophy here is that stocks generally sell for what they are worth. It prefers to focus on companies that are still in a stage of earnings acceleration.  

The system identifies companies with strong fundamentals— enjoying big earnings increases — and buying them when they emerge from price consolidation periods; or when prices have started to respond to good fundamentals and are showing a strong upward price movement. This is before they have dramatically advanced in price.

The drawback with this methodology is having large drawdowns and high volatility in the portfolio. Upside volatility is a positive factor which produces exceptional upside returns.

To minimize the problems of drawdowns and high downside volatility the system incorporates a unique tactical allocation strategy.

Tactical Allocation: (The second part)
Each week, the Index measures the momentum of the portfolio price over the last 12 months, on a rolling basis.  If the absolute momentum of the index is slowing and the trend line turns down, the index rotates out of equities and into short-term fixed income instruments.  When the trend line turns positive and a new uptrend begins, the index is reallocated from bonds back into growth stocks. Thus it meets the current requirements for inclusion.

Here is what is good about the strategy:
1.      It’s rules-based. There’s no discretionary decisions required. The relative momentum rule for earnings and price picks “good” growth stocks. The “Tactical allocation” rule triggers a switch between stocks and bonds based on which is performing.
2.      It’s a low activity strategy. The rules for "Stock Selection" are only checked once a month for rebalancing purposes, which leads to a fairly low turnover compared to other momentum strategies. The rules for “Tactical Allocation” are checked weekly. This part of the strategy initiates the switch from stocks to bonds and vice versa. 
3.      It’s based on both historical evidence and investor behavior.  The back-test makes sense as do the behavioral reasons for momentum factors. All good investment strategies are based on taking advantage of other investor's behavior.

Now for some caveats:
1.      The psychology of going all-in or all-out. It is a simple strategy, but having any position in the markets is never easy. It can be very difficult to psychologically go from an all stock to an all bond position. Some investors simply cannot stomach following “Tactical allocation” signals, no matter how simple they may be.
2.      Back-tests only tell you what has happened, not what will happen. This is true of all investment strategies, but it’s worth remembering that the future is promised to no one in the markets.

The verdict?
You have to know yourself as an investor when considering this type of strategy. It’s more about knowing yourself than understanding the strategy.

Even simple strategies are never easy to implement. This system has worked in the past, but investors have to define what “works” means to them. We say an investment strategy “works” if you’re to follow it over many different cycles. It never “works” if you bail out at the first sign of trouble or relative underperformance.


The System is an approach to achieving risk-managed exposure to the anomaly across asset classes. It establishes meaningful controls over investment risk, once an asset's value begins to decline. It removes emotional and behavioral biases from the decision-making, while taking advantage of these same biases in others to achieve exceptional returns.


Performance of EASI Tactical Growth Index, updated as of Jul 02, 2020

Index1 Year2 Year3 Year4 Year5 YearSince Inception
EASI Tactical Growth Index-13.7%-6.6%20.5%52.8%51.3%321.9%
S&P500® (SPX)6.6%20.1%36.8%61.3%66.9%245.9%
 Annualized Performance
EASI Tactical Growth Index-13.7%-3.4%6.4%11.2%8.6%15.8%
S&P500® (SPX)6.6%9.6%11.0%12.7%10.8%13.5%

Calendar year Performance of EASI Tactical Growth Index, updated as of Jul 02, 2020

EASI Tactical Growth Index-18.4%13.3%6.3%36.7%17.4%8.2%10.7%53.1%22.0%1.2%
S&P500® (SPX)-2.1%31.5%-4.4%21.8%12.0%1.4%13.7%32.4%16.0%2.1%


The EASI Tactical Growth Index was launched on February 27, 2017. Index values between September 10, 2010 and February 27, 2017 have been calculated pursuant to a back-tested methodology (i.e. calculations of how the index might have performed over that time period had the index existed) with an initial index value level of 100. There are frequently material differences between back-tested performance and actual results. Index returns do not reflect payment of any sales charges or fees an investor may pay to purchase securities underlying the Index or investment funds that are intended to track the performance of the Index, the imposition of which would cause actual and back-tested performance to be lower than the performance shown. Past performance of the Index, whether actual or back-tested, is not an indication or guarantee of future results. All Index values have been calculated by Solactive AG (See additional disclaimer below).

The Standard & Poor’s 500 Stock Index (“S&P 500 Index") is an unmanaged index generally representative of the U.S. stock market. Index returns do not reflect fees, commissions or other expenses of investing. Investors may not make direct investment into any index.


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