Trend + Sahm rule

▲ Promising

Index timing — holds SPY or T-bills

The trend filter gated by the Sahm rule: only step aside when SPY is below its 10-month average and the real-time Sahm recession indicator has triggered (≥ 0.5).

View 1-year backtest →

New backtests are run by the owner.

How it works

An illustration of the rules on made-up prices, not real data.

Long-run result — 1994–2026, SPY with T-bill cash

Annual return

12.8%

SPY 10.9%

Worst drawdown

-33.7%

SPY -55.2%

Best result so far: 4 trades in 32 years, beat SPY with ~40% less drawdown. Edge rests on 2 recessions.

Growth of $100,000 vs the same amount in SPY, 1994–2026

From the latest backtest run (to 2026-10-19): 12.8%/yr vs SPY 10.8%/yr; worst drop -33.7% vs -55.2%. Log scale, so equal percentage moves look the same size. Hover for values.

Rules

At each month-end: is SPY below its 10-month average?
And is the latest real-time Sahm rule reading ≥ 0.5? (FRED SAHMREALTIME)
Both → sell and hold T-bills; otherwise hold SPY

Assessment

+ Sahm rule has a near-perfect record identifying US recessions in real time
+ Very few false alarms, so very few whipsaws

− Triggers after a recession has started — often after much of the fall
− Rarely acts at all; behaves like buy-and-hold most of the time

Last 1-year backtest: 07 Oct 2026 — SPY 17.7%