The Kahneman-Tversky (K-T) Portfolio is a simple three-asset Dual Momentum portfolio split between a “slow” portion (Kahneman) with a single 12 month momentum look-back period and a “fast” (Tversky) portion with shorter 60- and 100-day momentum look-back periods. Each portion holds just one, highest ranked momentum, asset.
Let’s take a look at recent performance:
where we see that, over the past three months, we have been catching up to the benchmark VTTVX Fund. This is due to the fact that VTI (US equities) has been held in both portions of the portfolio.
So, let’s check on current rankings and recommendations to see if any adjustments are recommended. First, the slow Kahneman portion:
where we see (4th column from left) that VTI is still the top ranked asset with a Hold recommendation.
Checking the rotation graphs:
we see weakness in all ETFs (relative to TLT) as they have all move down and to the left over the past month and are sitting in the bottom right quadrant of the graph, still with positive long-term momentum but negative in the shorter term.
Moving on to the faster Tversky portion of the portfolio:
we see that TLT (US Treasuries) is ranked higher than either US or International equities (VTI and VEU) and is the ETF of choice for this portion of the portfolio.
Let’s compare the rotation graphs for this faster-moving portion of the portfolio to the slow moving Kahneman portion:
and we see all equity ETFs in the bottom left quadrant of the chart with negative momentum relative to TLT on both the longer and shorter term time frames.
The adjustment this month will therefore be to replace VTI with TLT in the Tversky portion of the portfolio.
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