Bold Asset Allocation — Aggressive (BAA-A)
Developed by Wouter Keller · Canary Universe · High Risk
The Aggressive variant of Bold Asset Allocation applies the same dual-speed canary architecture as the balanced variant but narrows the offensive portfolio to a single concentrated position. Published by Wouter Keller in his 2022 SSRN paper (#4166845), BAA-A selects just one asset from a compact four-asset offensive universe using the slow thirteen-month SMA ratio, while relying on the fast four-canary gate for crash protection. This maximally concentrated approach amplifies both the upside potential during risk-on periods and the opportunity cost of false defensive signals.
The four-asset offensive universe — US tech (QQQ), emerging markets (VWO), international developed (VEA), and aggregate bonds (BND) — is deliberately smaller than the balanced variant's twelve-asset universe. Keller selected these four as representative of the major asset class categories that exhibit meaningful momentum differentials: US growth equities, international equities, and fixed income. By limiting the universe to four assets, the strategy ensures that the single selected position represents a clear and decisive momentum signal rather than a marginal ranking distinction among similar alternatives.
The canary system operates identically to the balanced variant: four sentinel assets (SPY, VWO, VEA, BND) are scored monthly using the fast 13612W composite, and if any single canary shows negative momentum, the entire portfolio transitions to defensive mode. The defensive side uses the same enhanced seven-asset safe-haven universe and selects the top three by SMA ratio with a cash floor — meaning the aggressive variant has the same robust defensive infrastructure as the balanced version. The difference lies entirely in how the strategy invests during risk-on periods.
BAA-A spends the same approximately sixty percent of time in defensive mode as BAA-B, driven by the identical canary trigger sensitivity. During the roughly forty percent of months when all four canaries are positive, the portfolio holds a single concentrated position in whatever asset class shows the strongest trend by SMA ratio. This creates a strategy with extreme positioning — either fully concentrated in one risk asset or spread across three defensive positions — with no middle ground.
How It Works
Fast Canary Detection
The four-canary gate operates identically to BAA-B. US stocks (SPY), emerging markets (VWO), international developed stocks (VEA), and aggregate bonds (BND) are scored monthly using the 13612W composite. If any single canary produces a negative score, the portfolio transitions to full defensive mode. The broad four-canary coverage provides comprehensive early warning across different types of market stress, detecting trade disruptions through emerging markets, rate stress through bonds, and domestic equity weakness through SPY.
Concentrated Offensive Selection
When all canaries are positive, the four offensive assets — QQQ, VWO, VEA, and BND — are ranked by their thirteen-month SMA ratio. The single highest-ranking asset receives 100% of the portfolio's risk-on allocation. This maximally concentrated positioning means the portfolio is entirely exposed to one asset class during risk-on periods.
The thirteen-month SMA ratio provides a slow, stable ranking that changes infrequently. The dominant asset typically holds its top position for several consecutive months, reducing turnover within the risk-on regime. When leadership does shift — for example, from QQQ to VWO as US tech momentum fades and emerging markets accelerate — the transition is decisive and complete, moving the entire portfolio from one asset class to another in a single month.
Enhanced Defensive Universe
During the majority of months when the portfolio is in defensive mode, capital is allocated across the top three assets from the seven-member safe-haven universe: inflation-protected bonds (TIP), commodities (DBC), short-term Treasuries (BIL), intermediate Treasuries (IEF), long-term Treasuries (TLT), investment-grade bonds (LQD), and aggregate bonds (BND). Each defensive selection must outperform BIL to earn its allocation; those that fail default to cash.
The contrast between the offensive and defensive sides is striking: one concentrated position during risk-on versus three diversified positions during risk-off. This asymmetry reflects a specific design philosophy — during favorable conditions, maximum conviction in the strongest trend; during unfavorable conditions, diversified capital preservation across the best-performing safe havens. The result is a strategy that can produce exceptional returns during concentrated risk-on periods but delivers more modest, bond-like returns during the extended defensive periods that constitute the majority of months.
Explore Bold Asset Allocation — Aggressive (BAA-A)
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