Andreas,
This is certainly a good idea and I will look at the out-of-sample results. Too bad I, and many of the Designers, were not smart enough to do this a year ago. Too bad I cannot go back and change history. But backtests are a beautiful thing that might work going forward.
SteveA and SteveT,
Very plausible theories. What evidence (going forward) should I look at? As I understand you are expecting value models to do better going forward?
If what you say is true will the designer models be beating their benchmarks at a year. At 2 years?
Should I just look for the Designer models with a high value rating and see how these are doing at a year (or maybe 2 years)?
Generally, what evidence can I look at (going forward) that will give me some information as to how credible these theories are?
Personally, if both my (present) models and the Designer models are underperforming in a year, I will be changing my ideas of what is the most likely explanation.
For now, I hope you are right and I think there is a good chance that you are. But I have been predicting a turnaround myself and the turnaround theory gets a little less credible every day for me.
Maybe it is just the trade war—another credible theory I think. I am not saying I know.
I will say I am pretty convinced that something changed but that it could be cyclical. Going forward–until I get more evidence–I will be looking at more conservative (and rationally based) allocations and possibly cyclical adjustments of the weights I put into ports/ETFs. I do not believe that this is inconsistent with what your are saying.
In fact, SteveT, I think I may have gotten my allocation strategy from you: IE., the Tangency Portfolio or maybe the Minimum Volatility Portfolio. Maybe use MPT to find the optimal portfolio using predictive models for the expected returns.
This last would, in essence, be a cyclical adjustment of the allocation: of the port/ETF weights.
-Jim