*August holds SUMMER, barely. Nothing to do if you're already positioned, as this is the third month in the regime since sharing this strategy. July recovered nicely (+3.2%, essentially flat with SPY's +3.4%), and the commodity tickers that were weaker in June led the bounce. The SPRING rotation I flagged as possible last month didn't fully confirm (more on this shortly) — and July's data reverted to a very marginal SUMMER. August's fresh read is leaning heavily towards SPRING again given the strong disinflationary impulse, so a September rotation is probable. Same discipline as always: we wait for confirmation, as per the strategy rules… no chasing provisionals in an attempt to front-run.
But, a brief note on this marginal SUMMER and, for those that have MMM, why it differs from the Goldilocks regime that has now confirmed:
REGIME ROTATION is a backtested and robustness-validated ETF rotation strategy, and MMM is a pure input-output macro regime model; whilst REGIME ROTATION builds on the regime work from MMM, its strategic composition and thus positioning is more complex than simply reading the regime and buying whatever historically performs well in that regime. If you have MMM, you will see August is now a T+1 Goldilocks + Loose regime (or SPRING); thus, if you were not following a prebuilt strategy, you could conceivably and justifiably look for what historically performs best and allocate accordingly for August. For Regime Rotatooors (and for my own personal L/S strategy), this is not how it works according to the live implementation conventions and, whilst it is extremely likely we will be rotating in September given the disinflationary impulse, for now the strategy rules say hold the SUMMER allocation for the duration of August.
Remember you can track everything related to the Regime Rotation strategy for free at:
https://regimerotation.netlify.app/
So, again - if you’re already positioned from July, there’s nothing to do. If you’re DCA’ing to the strategy on a monthly basis, obviously you just allocate the fresh capital according to the Trade Ticket weights, but do not rebalance what is already positioned. The allocation is unchanged for August. This is the third month running in SUMMER for the public REGIME ROTATION, and the book stays exactly where it was. Do not attempt to front-run the regime transition if you want to follow the strategy precisely to the backtest conventions.
For anyone implementing fresh this month, here’s the allocation:
Total: 100%. Rebalance on the first Friday (or TODAY) and hold through the month until next positioning update.
I said at launch I’d report every month straight: green or red.
July was very green but basically flat vs. the benchmark.
Regime Rotation returned +3.24% in the July rebalancing period. SPY returned +3.36%.
NOTE: As mentioned in July, on the Regime Rotation dashboard, you will see +3% for July in the Returns tab - and this is because of the discrepancy between live implementation logic / rebalancing conventions and a standard close-to-close monthly return. I haven’t had the time yet to implement that additional tab on the dash to toggle these returns but will do next week.
Here’s the exact daily attribution for July 6th - August 5th (close-to-close) - obviously, I am sharing this a day earlier than the first Friday rebalancing convention as I am afk tomorrow, so these numbers could change marginally after today’s close:
What worked: The commodity and energy tickers, primarily. DBC and XLE added +1.09% and +0.76%, respectively.
What did not work: Very little, to be honest. Only low-vol equities were marginally negative at -0.04%.
Year-to-date, Regime Rotation is +13% versus SPY’s +8.6% (as per last week’s close, though this will look a little tighter after this week closes I would imagine):
While July only marginally remained in SUMMER due to strategy conventions, August’s incoming data is once again leaning heavily towards SPRING: growth firm + inflation impulse dramatically weakened.
The same rules apply as always:
It is not a signal to do anything today. August trades SUMMER: no front-running.
August’s classification drives September’s positioning, and only if it confirms once the month’s data completes, though I find it very hard to imagine we don’t have a SPRING transition for September’s rebalancing.
I will share the Trade Ticker for September around that first Friday, but you can look at the Allocations tab on the dashboard for what SPRING would favour.
As a quick point of comparison, here is what the raw regime modelling from MMM is showing:
This is just me sharing a brief glimpse of what I am seeing on my end - and if you want more depth on the regime modelling (including per-input breakdowns for growth, inflation and liquidity and much more), you can find it at:
August: hold SUMMER. Nothing to do if you’re already positioned. Watch for a probable SPRING rotation in September.
Read the regime, rotate the portfolio, beat the benchmark.
For informational purposes only. Not investment advice. Do your own research.
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