Understanding Dual Momentum Investing: A Smarter Way to Navigate Markets

At BMERIN Research & Investment, we specialize in research-based investment strategies designed for both growth and resilience. One of the key frameworks we use is Dual Momentum Investing, developed by Gary Antonacci. This strategy has proven to work across time, regions, and asset classes—and it's especially helpful for investors looking for clarity and consistency in uncertain markets.

Unlike passive “buy-and-hold” approaches, Dual Momentum adapts to market trends using objective, rules-based decision-making. It helps investors stay invested in strength and avoid major losses during weak periods.

1. Who Is Gary Antonacci?

Gary Antonacci is a respected quantitative investor and the author of the groundbreaking book “Dual Momentum Investing: An Innovative Strategy for Higher Returns with Lower Risk.”

He earned his MBA from Harvard and has decades of experience managing hedge funds and advising institutional investors. His work is known for bridging academic research with real-world practicality. Antonacci’s Dual Momentum strategy is based on insights from behavioral finance and momentum research published in top finance journals.

His backtests show that combining relative momentum and absolute momentum  significantly outperforms traditional investing methods, with lower drawdowns and higher long-term returns.

2. What is Dual Momentum?

Momentum is the idea that assets which are performing well tend to keep performing well—just like a ball rolling downhill continues until something stops it. Antonacci refers to this as a kind of “Newtonian principle” for investing: things in motion stay in motion.

Dual Momentum strengthens this idea by using two types of momentum together:

Relative Momentum: This compares different assets (like U.S. stocks vs. international stocks) and selects the one that performed better over a set period, such as the past 12 months. It’s like choosing the fastest train to take you forward.

Absolute Momentum: Even if one asset is stronger than the other, this check ensures the asset is actually moving upward compared to a safe benchmark (like U.S. Treasury bills). If it isn’t moving up at all, it’s better to wait or shift to something safer. Think of this as checking whether the train is heading in the right direction.

By combining both types, dual momentum helps you stay in strong, rising assets while avoiding those heading downward—even if they seem better than others.

3. The Global Equities Momentum (GEM) Model: The Core Strategy

Gary Antonacci’s foundational strategy is called Global Equities Momentum (GEM). It’s simple, rule-based, and designed for everyday investors who want to make smarter choices without watching the markets every day.

How It Works: The Rules

Each month, GEM asks two questions:

1. Is the S&P 500 (U.S. stocks) doing better than U.S. Treasury bills over the past 12 months?

   • If No: Stocks aren’t strong enough. Invest in safe U.S. bonds (like AGG).

   • If Yes: The market has upward momentum. Move to question 2.

2. Is the S&P 500 doing better than international stocks (world stock index excluding the U.S.)?

   • If Yes: Invest in U.S. stocks (S&P 500 ETF, like SPY).

   • If No: Invest in international developed market stocks (ETF like EFA).

So, where does your money go? At any given time, the GEM model holds your full portfolio in one of the following:

• U.S. Stocks (SPY – S&P 500 Index)

• Non-U.S. Stocks (EFA – Developed Markets ETF)

• U.S. Bonds (AGG or SHY – Bond ETFs)

Why It’s Simple and Powerful

• Low Turnover: The portfolio typically changes positions about 1.4 times per year, keeping trading costs low.

• Clear Rules: You only need to check once a month—no daily watching or market timing.

• Crash Protection: If stocks are weak, the model shifts into bonds, helping you avoid large losses like those seen in 2008 or 2022.

This structure makes GEM a great “core strategy” for building long-term wealth with a defensive mindset.

4. How We Use Dual Momentum in Our Practice

We apply Dual Momentum using ETFs in a diversified, yet simple way. Our preferred assets include:

• SPY (U.S. stocks)

• EFA (Non-U.S. developed stocks)

• AGG or TLT (U.S. bonds)

• GLD (Gold)

• QLD (2x NASDAQ, used selectively)

We also use monthly rebalancing and monitor market conditions using additional signals to improve decision-making. These include:

4-1. Mean Reversion Filter: How We Detect Overbought Markets

Sometimes, a market may rise too quickly in a short time. While it may look strong, it could be ready for a pullback. We use Mean Reversion Filters to avoid entering at these overheated moments.

What We Look At:

• RSI (Relative Strength Index): If RSI is above 70, the asset may be overbought.

• Price distance from 50-day or 200-day moving average: If price is significantly higher than its average (e.g., more than 5–7%), we consider it stretched.

• Z-score of short-term returns: A return that is 2 standard deviations above the mean suggests unusual behavior.

Example: If QLD (2x NASDAQ ETF) gained 25% in 3 weeks and RSI is 78, we may delay entry—even if it passed momentum filters—until the price consolidates.

4-2. Breadth Indicators: Is the Market Rally Broad or Narrow?

Breadth measures how many stocks are participating in a move. If only a few large-cap stocks are rising while the rest are falling, it’s a warning sign. We want to see strength across the market.

What We Monitor:

• Advance-Decline Line (A/D Line): If more stocks are advancing than declining, the trend is strong.

• Percentage of stocks above 50-day moving average: Healthy rallies usually have more than 50% of stocks above their 50-day MA.

• New Highs vs. New Lows: A strong market sees more stocks hitting new highs.

Example: If SPY is rising but only 35% of stocks in the S&P 500 are above their 50-day average, and the A/D line is falling, we may avoid entering despite strong index performance.

These filters help us avoid entering weak or risky market environments, even when momentum appears positive.

5. Final Thoughts

At BMERIN Research & Investment, we believe that Dual Momentum offers a rare combination of simplicity, protection, and growth. Whether you’re a new investor or a seasoned one, this strategy provides clear rules for navigating markets with confidence.

We hope this explanation has helped you better understand how Dual Momentum works—and how it could fit into your own investment journey.

Thank you for visiting our website. We hope this strategy helps you invest more wisely, safely, and successfully.