Carlson's Defense First
Compute average momentum (mean of 1m, 3m, 6m, 12m returns) for TLT, GLD, PDBC, UUP, and BIL. Backtest max drawdown: -20.5%.
Strategy & methodology
Compute average momentum (mean of 1m, 3m, 6m, 12m returns) for TLT, GLD, PDBC, UUP, and BIL; Rank the 4 defensive assets by momentum (descending); Assign tiered weights: Rank 1 = 40%, Rank 2 = 30%, Rank 3 = 20%, Rank 4 = 10%; For each…
- Strategy type:
- Tactical asset allocation
- Rebalance frequency:
- Monthly
- Original publication:
- 2025-07-01; results after that are out-of-sample for the original research. All results are backtest simulations.
- Data through:
- Backtest data through 2026-10-01.
Simulated history
Stand-in funds and until when (3)
- PDBC: DBC before Nov 7, 2014
- TLT: VUSTX before Jul 26, 2002
- SPY: VFINX before Jan 29, 1993
Before these dates the backtest uses a stand-in, not the fund itself, so the results over those stretches show how the rules would have behaved, not what the fund returned.
Research data and disclosures
Compute average momentum (mean of 1m, 3m, 6m, 12m returns) for TLT, GLD, PDBC, UUP, and BIL. Backtest max drawdown: -20.5%. This is a tactical asset allocation strategy. BestFolio supplies the public rule or approach and backtest context; current signals, allocations, and paid interactive data remain restricted to Pro access. Users review the published signal and place any resulting trades in their own brokerage. Displayed returns remain hypothetical and do not represent a customer's brokerage record. The facts above show how current the data is.
- BestFolio supplies
- The monthly signal email and this strategy page; current signals and email alerts require Pro access.
- Customer action
- Review the published signal and place any required trades in your own brokerage. BestFolio does not execute orders.
- Costs and exclusions
- Backtests are net of a modeled one-way transaction cost (10 bps, scaled up to 3x under stress); taxes, fund-expense drift, or market impact are not modeled. No tax, no slippage beyond the stated cost. Methodology limitations
Published result: Engine drift-until-flip-v1, data version de0093ff, published 2026-10-01
Is Carlson's Defense First still working in 2026?
Carlson's Defense First returned 20.29% over the trailing 12 months and 85.86% over 36 months through 2026-10-01, compared with a full-backtest annualized return of 10.78%. Its full-backtest maximum drawdown was -20.55%. The full sample contains 10369 daily NAV observations from 1986-02-28. These are model results, not investor account returns or a promise. As of 2026-10-01 it is -3.03% below its high-water mark of 2026-05-12, 5 months ago, and its longest run below a previous high was 2.2 years. Recent returns do not establish that the strategy will keep working.
| Period | Return | CAGR | Max drawdown | Observations | Dates |
|---|---|---|---|---|---|
| Trailing 12 months | 20.29% | Not annualized | -10.37% | 252 | 2025-10-01 to 2026-10-01 |
| Trailing 36 months | 85.86% | Not annualized | -10.37% | 754 | 2023-09-29 to 2026-10-01 |
| Full backtest | 6287.87% | 10.78% | -20.55% | 10369 | 1986-02-28 to 2026-10-01 |
Last verified
Common questions about these results
Are these live investor returns?
No. These are the latest model NAV results from the published backtest. A recent date alone does not make a result an independently observed live record. Investor costs, taxes and execution can differ.
Why can a strategy lag for a year?
A tactical model can hold defensive assets during a rally or change positions during reversals. A short window can differ substantially from its full history. Compare cumulative returns over matching dates and inspect drawdowns as well.
How long has it spent below a previous high?
Its last high-water mark was 2026-05-12, 5 months before 2026-10-01, and it is -3.03% below that level now. The longest run below a previous high in the full backtest was 2.2 years. Recovering from a drawdown can take years, and a strong trailing return does not mean a past high has been regained.
Where can I check the signals behind these results?
The Signals tab on this page lists each dated model decision for the selected variant; for Pro strategies they are visible to Pro members. The methodology page explains the backtest assumptions.
Carlson's Defense First at a glance
Carlson's Defense First is a tactical asset allocation (TAA) strategy by Thomas Carlson across Long-Term Treasuries, Gold, Commodities, US Dollar, rebalanced monthly. Backtested 1986-02-28 to 2026-10-01 (40.6 years): 10.8% CAGR, 1.17 Sharpe, -20.5% max drawdown, 10.1% volatility.
- Type
- Tactical (TAA)
- Author
- Thomas Carlson
- Rebalancing
- Monthly
- Risk
- Conservative
- Period
- 1986-02-28 to 2026-10-01
- CAGR
- 10.8%
- Sharpe
- 1.17
- Max Drawdown
- -20.5%
- Volatility
- 10.1%
Carlson's Defense First — Tactical Asset Allocation Strategy
Thomas Carlson's Defense First strategy inverts the typical TAA approach: instead of starting with equities and adding defensive overlays, it starts from a fully defensive posture and only adds equity exposure when defensive assets underperform.
Each month, four defensive assets (TLT, GLD, PDBC, UUP) are ranked by average momentum (1/3/6/12-month returns) and assigned tiered weights: 40%, 30%, 20%, 10%. If a defensive asset's momentum falls below BIL (T-bills), that allocation is redirected to SPY. The result ranges from 100% defensive to 100% SPY depending on how many defensive assets underperform cash.
Carlson's Defense First: frequently asked questions
- What is Carlson's Defense First?
- Defensive-first approach ranking 4 safe-haven assets (bonds, gold, commodities, dollar) by multi-period momentum. Assets underperforming T-bills are replaced by equities. Inverts the typical offense-first TAA paradigm. Monthly rebalancing.
- Who created the Carlson's Defense First strategy?
- Carlson's Defense First was developed by Thomas Carlson. It is based on Carlson, T. (2025). Defense First.
- What is the historical return and maximum drawdown of Carlson's Defense First?
- Backtested from 1986-02-28 to 2026-10-01, Carlson's Defense First returned 10.8% CAGR with a -20.5% maximum drawdown and a Sharpe ratio of 1.17. Past performance does not guarantee future results.
- How often is Carlson's Defense First rebalanced?
- Carlson's Defense First is rebalanced monthly. BestFolio publishes the updated allocation signal each period.
- Is Carlson's Defense First a tactical asset allocation strategy?
- Yes. Carlson's Defense First is a tactical asset allocation (TAA) strategy: it adjusts its holdings based on market signals each period rather than holding a fixed allocation.
Backtest Performance (1986-02-28 to 2026-10-01)
| Metric | Carlson's Defense First |
|---|---|
| CAGR | 10.8% |
| Max Drawdown | -20.5% |
| Sharpe | 1.17 |
| Sortino | 2.19 |
| Volatility | 10.1% |
| Calmar | 0.52 |
| Total Return | 6255.5% |
| Backtest Period | 40.6 years |
Every rebalance fills at the signal-day close, net of modeled transaction costs. Followers trade at the next open; the delayed-close line in the Rebalance Frequency Sensitivity card shows the effect of trading one session later. Execution assumption
Strategy Details
- Type
- Tactical (TAA)
- Rebalancing
- monthly
- Risk Level
- conservative
- Variants
- 1
- Author
- Thomas Carlson
- Source
- Carlson, T. (2025). Defense First
Asset Classes
- Long-Term Treasuries
- Gold
- Commodities
- US Dollar
- US Equity
Categories
Further reading
New to this approach? Read what tactical asset allocation is and how it works.
Holding Carlson's Defense First alongside another strategy? Use the free portfolio overlap calculator to see how much of the two portfolios actually differs.
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