SPF Recession Probability at a glance
SPF Recession Probability is a tactical asset allocation (TAA) strategy by Sun & Wang (market-proxy variant) across US Equity, Treasuries, High Yield Bonds, T-Bills, rebalanced monthly. Backtested 1992-11-30 to 2026-04-24 (33.3 years): 7.6% CAGR, 0.93 Sharpe, -15.8% max drawdown, 8.2% volatility.
- Type
- Tactical (TAA)
- Author
- Sun & Wang (market-proxy variant)
- Rebalancing
- Monthly
- Period
- 1992-11-30 to 2026-04-24
- CAGR
- 7.6%
- Sharpe
- 0.93
- Max Drawdown
- -15.8%
- Volatility
- 8.2%
SPF Recession Probability — Tactical Asset Allocation Strategy
The SPF Recession Probability strategy uses a credit-spread proxy (HYG vs IEF performance) as a recession indicator, rebalancing quarterly. When credit markets show confidence (HYG outperforming), the portfolio goes 60% stocks / 40% defensive. When flight-to-safety is signaled, it shifts to 100% defensive. The Dynamic Bond variant tests whether IEF passes a 12-month momentum check — if not, defensive allocation shifts to cash (BIL). Note: this is a market-proxy implementation; the original AllocateSmartly version uses Philadelphia Fed Survey of Professional Forecasters data.
Backtest Performance (1992-11-30 to 2026-04-24)
| Metric | SPF Recession Probability |
|---|---|
| Compound Annual Growth Rate (CAGR) | 7.6% |
| Maximum Drawdown | -15.8% |
| Sharpe Ratio | 0.93 |
| Sortino Ratio | 1.21 |
| Annualized Volatility | 8.2% |
| Calmar Ratio | 0.48 |
| Total Return | 1051.8% |
| Backtest Period | 33.3 years |
Strategy Details
- Type
- Tactical (TAA)
- Rebalancing
- monthly
- Variants
- 2
- Author
- Sun & Wang (market-proxy variant)
- Source
- Sun, Y. & Wang, K. (2025). Navigating Economic Downturns. Market-proxy variant with Dynamic Bond overlay.
Asset Classes
- US Equity
- Treasuries
- High Yield Bonds
- T-Bills
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