Global Equities Momentum (GEM) is one of the most influential tactical asset allocation strategies ever published. Created by Gary Antonacci, it introduced the concept of dual momentum — combining relative strength with trend following — into a simple, rules-based system that any investor can implement with just three ETFs and a monthly check-in.
What Is GEM?
GEM stands for Global Equities Momentum. It is a momentum strategy that makes one decision each month: should you be in U.S. stocks, international stocks, or bonds? The strategy uses 12-month total returns to answer this question, applying two layers of momentum filtering.
First, relative momentum compares U.S. equities against international equities to pick the stronger performer. Then, absolute momentum checks whether the winner is actually in an uptrend by comparing it to Treasury bills. If stocks are losing to T-bills, the strategy moves entirely to bonds — a built-in bear market protection mechanism.
Who Created It?
Gary Antonacci is a financial researcher and author of Dual Momentum Investing: An Innovative Strategy for Higher Returns with Lower Risk (McGraw-Hill, 2014). Antonacci spent decades studying momentum anomalies in financial markets and was among the first to combine absolute and relative momentum into a single, practical system. His work built on the academic momentum research of Jegadeesh and Titman, making it accessible to retail investors through simple ETF rotation.
How Does It Work?
GEM follows a straightforward monthly rebalancing process:
- Calculate 12-month returns for U.S. stocks (SPY), international stocks (EFA/VEU), and U.S. aggregate bonds (AGG/BND).
- Relative momentum test: Compare U.S. stocks vs. international stocks over the past 12 months. The winner is your equity candidate.
- Absolute momentum test: Compare the equity winner's 12-month return against the risk-free rate (T-bills). If the equity winner beats T-bills, invest 100% in that equity ETF. If not, invest 100% in aggregate bonds.
- Hold for one month, then repeat.
The strategy is fully invested at all times — it just shifts between equities and bonds. This makes it straightforward to implement with a standard brokerage account and keeps transaction costs minimal, typically requiring only 0-2 trades per month.
Historical Performance
Based on BestFolio's backtest from October 1990 through March 2026 (35+ years):
- CAGR: ~11.3%
- Maximum Drawdown: -33.7%
- Backtest Period: 35 years
GEM's key strength is its ability to sidestep the worst of bear markets by rotating to bonds when equity momentum turns negative. During the 2008 financial crisis, for instance, the strategy moved to bonds well before the worst of the drawdown. However, it is not immune to whipsaw — sharp, fast reversals can cause the strategy to sell low and buy back high, which explains the -33.7% max drawdown figure.
Compared to a Classic 60/40 portfolio (CAGR ~8.8%), GEM has delivered meaningfully higher returns while offering a systematic exit mechanism during prolonged downturns.
Pros and Cons
Pros
- Simple: Only three ETFs and a single monthly check.
- Evidence-based: Momentum is one of the most studied and persistent anomalies in finance.
- Bear market protection: The absolute momentum filter moves to bonds during sustained downtrends.
- Low turnover: Monthly rebalancing with concentrated positions keeps costs low.
Cons
- All-or-nothing: The strategy is 100% in one asset at a time, which can feel uncomfortable.
- Whipsaw risk: Choppy markets can trigger frequent, unprofitable switches.
- Lagging indicator: 12-month lookback means the strategy is slow to react to sudden crashes.
- Tax inefficiency: Frequent asset class switches can generate short-term capital gains.
Try It on BestFolio
GEM is one of our free strategies — you can view the full backtest, monthly signals, and current allocation without a subscription. See how dual momentum has performed across decades of market cycles, and compare it against other tactical and fixed allocation approaches.
Interested in other momentum strategies? Check out our comparison of GEM, ADM, and CDM, or explore the broader world of tactical asset allocation.