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 2026-07-03 (40.3 years): 10.7% CAGR, 1.15 Sharpe, -20.3% max drawdown, 10.2% volatility.
- Type
- Tactical (TAA)
- Author
- Thomas Carlson
- Rebalancing
- Monthly
- Risk
- Conservative
- Period
- 1986-02-28 to 2026-07-03
- CAGR
- 10.7%
- Sharpe
- 1.15
- Max Drawdown
- -20.3%
- Volatility
- 10.2%
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 2026-07-03, Carlson's Defense First returned 10.7% CAGR with a -20.3% maximum drawdown and a Sharpe ratio of 1.15. 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 2026-07-03)
| Metric | Carlson's Defense First |
|---|---|
| Compound Annual Growth Rate (CAGR) | 10.7% |
| Maximum Drawdown | -20.3% |
| Sharpe Ratio | 1.15 |
| Sortino Ratio | 1.99 |
| Annualized Volatility | 10.2% |
| Calmar Ratio | 0.53 |
| Total Return | 5855.4% |
| Backtest Period | 40.3 years |
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.
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