Growth-Inflation Sector Timing
Growth signal: SPY > 200-day SMA = high growth, below = low growth. Backtest max drawdown: -38.9%.
Strategy & methodology
Growth signal: SPY > 200-day SMA = high growth, below = low growth; Inflation signal: (XLE+XLB+XLI+XLF) / (XLU+XLV+XLP+XLY) ratio > its 200-day SMA = high inflation; High Growth + High Inflation → 100% XLE (Reflation); High Growth + Low…
- Strategy type:
- Tactical asset allocation
- Rebalance frequency:
- Monthly
- Original publication:
- 2024; results after that are out-of-sample for the original research. All results are backtest simulations.
- Data through:
- Backtest data through 2026-10-02.
Simulated history
Stand-in funds and until when (4)
- XLV: FSPHX before Dec 22, 1998
- XLP: FDFAX before Dec 22, 1998
- XLK: FSPTX before Dec 22, 1998
- XLE: FSENX before Dec 22, 1998
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
Growth signal: SPY > 200-day SMA = high growth, below = low growth. Backtest max drawdown: -38.9%. 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 03146d05, published 2026-10-01
Is Growth-Inflation Sector Timing still working in 2026?
Growth-Inflation Sector Timing returned 30.78% over the trailing 12 months and 54.08% over 36 months through 2026-10-02, compared with a full-backtest annualized return of 15.52%. Its full-backtest maximum drawdown was -38.86%. The full sample contains 9886 daily NAV observations from 1987-10-30. These are model results, not investor account returns or a promise. As of 2026-10-02 it is -4.72% below its high-water mark of 2026-09-15, 17 days ago, and its longest run below a previous high was 2.5 years. Recent returns do not establish that the strategy will keep working.
| Period | Return | CAGR | Max drawdown | Observations | Dates |
|---|---|---|---|---|---|
| Trailing 12 months | 30.78% | Not annualized | -13.24% | 251 | 2025-10-02 to 2026-10-02 |
| Trailing 36 months | 54.08% | Not annualized | -19.38% | 753 | 2023-10-02 to 2026-10-02 |
| Full backtest | 27327.58% | 15.52% | -38.86% | 9886 | 1987-10-30 to 2026-10-02 |
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 2026-09-15, 17 days before 2026-10-02, and it is -4.72% below that level now. The longest run below a previous high in the full backtest was 2.5 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.
Growth-Inflation Sector Timing at a glance
Growth-Inflation Sector Timing is a tactical asset allocation (TAA) strategy by Inspired by David Varadi (CSS Analytics) across Energy, Technology, Materials, Healthcare, rebalanced monthly. Backtested 1987-10-30 to 2026-10-02 (38.9 years): 15.4% CAGR, 0.88 Sharpe, -38.9% max drawdown, 20.5% volatility.
- Type
- Tactical (TAA)
- Author
- Inspired by David Varadi (CSS Analytics)
- Rebalancing
- Monthly
- Risk
- Aggressive
- Period
- 1987-10-30 to 2026-10-02
- CAGR
- 15.4%
- Sharpe
- 0.88
- Max Drawdown
- -38.9%
- Volatility
- 20.5%
Growth-Inflation Sector Timing — Tactical Asset Allocation Strategy
Growth-Inflation Sector Timing is a macro regime rotation strategy inspired by David Varadi of CSS Analytics. It classifies the economic environment into four quadrants based on growth and inflation signals, then allocates to the sector ETF that historically performs best in that regime.
Growth signal: SPY vs 200-day SMA. Inflation signal: ratio of inflation-positive sectors (XLE, XLB, XLI, XLF) to inflation-negative sectors (XLU, XLV, XLP, XLY) vs its 200-day SMA.
Growth-Inflation Sector Timing: frequently asked questions
- What is Growth-Inflation Sector Timing?
- Macro regime rotation based on growth (SPY 200d SMA) and inflation (sector relative performance). Classifies the economy into 4 quadrants and allocates to the sector ETF that historically performs best in each regime. Inflation signal derived from relative strength of inflation-positive sectors (XLE/XLB/XLI/XLF) vs inflation-negative sectors (XLU/XLV/XLP/XLY).
- Who created the Growth-Inflation Sector Timing strategy?
- Growth-Inflation Sector Timing was developed by Inspired by David Varadi (CSS Analytics). It is based on Inspired by Varadi, D. (CSS Analytics). Growth-Inflation Sector Timing.
- What is the historical return and maximum drawdown of Growth-Inflation Sector Timing?
- Backtested from 1987-10-30 to 2026-10-02, Growth-Inflation Sector Timing returned 15.4% CAGR with a -38.9% maximum drawdown and a Sharpe ratio of 0.88. Past performance does not guarantee future results.
- How often is Growth-Inflation Sector Timing rebalanced?
- Growth-Inflation Sector Timing is rebalanced monthly. BestFolio publishes the updated allocation signal each period.
- Is Growth-Inflation Sector Timing a tactical asset allocation strategy?
- Yes. Growth-Inflation Sector Timing 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 (1987-10-30 to 2026-10-02)
| Metric | Growth-Inflation Sector Timing |
|---|---|
| CAGR | 15.4% |
| Max Drawdown | -38.9% |
| Sharpe | 0.88 |
| Sortino | 1.52 |
| Volatility | 20.5% |
| Calmar | 0.40 |
| Total Return | 26751.3% |
| Backtest Period | 38.9 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
- aggressive
- Variants
- 2
- Author
- Inspired by David Varadi (CSS Analytics)
- Source
- Inspired by Varadi, D. (CSS Analytics). Growth-Inflation Sector Timing
Asset Classes
- Energy
- Technology
- Materials
- Healthcare
- Consumer Staples
Categories
Further reading
New to this approach? Read what tactical asset allocation is and how it works.
Holding Growth-Inflation Sector Timing alongside another strategy? Use the free portfolio overlap calculator to see how much of the two portfolios actually differs.
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