Global Growth Cycle — Enhanced (GGC-ENH)
Developed by Grzegorz Link · Macro + Trend · Med Risk
The Enhanced variant of Global Growth Cycle extends Link's original CLI-based strategy by adding a relative momentum comparison between US and international equities. Where the base GGC makes a binary decision between US equities and cash, GGC-ENH first determines whether the economy is in a growth phase using the CLI, then selects the stronger equity market when conditions are favorable — combining macro regime timing with cross-border momentum rotation.
The enhancement addresses a limitation of the base strategy: by holding only US equities during growth phases, GGC misses periods when international markets substantially outperform the US — multi-year cycles driven by relative valuations, currency movements, and divergent monetary policies. By adding a relative strength comparison between US equities (SPY) and international equities (VXUS), the enhanced variant captures these rotational cycles, potentially improving returns during growth phases without compromising the defensive mechanism.
During favorable macro conditions (CLI above trend), the strategy compares trailing twelve-month returns of SPY and VXUS and holds the winner. This relative momentum layer exploits the same cross-border rotation effect that drives dual momentum strategies like GEM, but applies it only during confirmed economic expansions — avoiding the risk of holding equities during CLI-identified contractions regardless of which market appears stronger.
The defensive side is also enhanced relative to the base strategy. Rather than defaulting exclusively to short-term Treasuries, GGC-ENH selects the better-performing of intermediate bonds (IEF) and cash (BIL) during defensive phases, providing some duration flexibility that can improve returns during rate-cutting recessions where intermediate bonds appreciate substantially.
How It Works
CLI Regime Determination
The first-stage decision is identical to the base GGC: the OECD Composite Leading Indicator is evaluated monthly against its long-term trend. Readings above trend indicate an expansion phase suitable for equity allocation. Readings below trend signal contraction, triggering a shift to defensive positioning. This macro gate serves as the primary risk management mechanism, keeping the portfolio in cash-equivalent instruments during economic downturns regardless of equity market momentum.
Equity Rotation During Growth Phases
When the CLI confirms an expansion, the strategy compares trailing twelve-month total returns of US equities (SPY) and international equities (VXUS). The market with stronger momentum receives the entire equity allocation. This relative comparison captures the multi-year US-versus-international leadership cycles that can produce meaningful return differentials — during the 2000s, international markets substantially outperformed the US, while during the 2010s the pattern reversed.
The twelve-month lookback provides a stable signal that changes infrequently, consistent with the business-cycle frequency of the macro regime indicator. The combination of macro timing with regional momentum rotation adds value during growth phases without increasing the strategy's already minimal turnover — the regional selection simply adds one additional monthly check that rarely changes.
Adaptive Defensive Selection
During CLI-identified contractions, the strategy selects the better-performing of intermediate bonds (IEF) and short-term Treasuries (BIL) based on trailing momentum. This dual defensive option improves upon the base strategy's cash-only defense by allowing the portfolio to capture bond gains during rate-cutting recessions — periods where intermediate bonds can appreciate by ten to fifteen percent as central banks ease monetary policy.
During inflationary contractions where both equities and bonds decline, the momentum comparison naturally selects BIL, preserving capital in cash-equivalent instruments. This adaptive defense provides regime-appropriate protection without requiring the strategy to predict which type of recession is occurring — the momentum signal identifies the right defensive asset based on observed performance rather than economic forecasting.
Explore Global Growth Cycle — Enhanced (GGC-ENH)
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