Stress-Testing a Tactical Allocation Model: Robustness and Improvements

Performance and resilience across different specifications

Hi there,

Over the past weeks, I’ve received several thoughtful questions from subscribers about the tactical allocation model I discussed earlier. Many of you asked about robustness: What happens if we change the weighting scheme? What if we adjust the thresholds or modify the defensive set of assets? Others wondered about possible improvements and whether the strategy holds up across variations.

In today’s post, I’ll take a systematic look at these issues. My main takeaway upfront is that the framework is surprisingly robust. Across weighting choices, signal specifications, and parameter shifts, the model continues to deliver equity-like returns with far smaller drawdowns than SPY. Still, there are interesting nuances worth highlighting.