LT Gain Strategy Overview

LT Gain is a single-asset momentum strategy developed by Randy Harris of Dual Momentum Systems. It holds U.S. large-cap equities and nothing else, for as long as U.S. large cap is worth holding. When it is not, the strategy steps out entirely and a second mechanism decides what kind of safety to hold instead.

It is the simplest strategy in the Dual Momentum Systems lineup, and deliberately so. There is exactly one question asked each month, and the answer is always a single ETF at 100%. There is no region selection, no sleeve structure, no partial weights, and nothing to reconcile between competing signals. The goal is to avoid switching often and incurring short-term capital gains rates. Over the long term this strategy has performed well; over short periods results can vary considerably, because there is only ever one holding.

Core Strategy Logic

Every decision runs off one momentum measure: a weighted average of trailing 1-month, 3-month, and 6-month total returns, weighted 25% / 25% / 50%. The six-month figure carries the most weight, with the shorter windows there to register a turn before the longer one does. Signals are computed at month end and drive the holding for the following month.

Step 1 - In or out (absolute momentum)

U.S. large cap (IWB) is compared against cash (BIL). If equities are beating cash, the strategy holds 100% IWB. If cash is winning, the strategy is Risk Off and holds nothing but Treasuries.

That is the entire equity decision. There is no relative momentum step, no second candidate competing for the allocation, and no forecast of any kind. The strategy is not trying to identify the best asset. It is asking a single question about one asset, repeatedly, and acting on the answer.

The name reflects the intent. LT Gain aims to hold the long-term compounding engine of a U.S. portfolio for as much of its advance as possible while declining to ride it all the way down.

Step 2 - Which safety (Treasury Duration Limiter)

Most tactical strategies retreat to long Treasuries and leave it there. That works well when a selloff is a growth scare and badly when it is an inflation or rate shock, which is exactly when stocks and long bonds fall together.

The Treasury Duration Limiter (TDL) is the answer. It is a duration decision, made once per defensive episode rather than re-argued every month:

Situation	Holding
First month of a Risk Off run, long Treasuries still profitable	EDV (long duration)
Later months, long Treasuries still profitable	TLT (long duration)
Long Treasuries themselves losing money	BOXX (short duration), locked for the rest of the run

The trigger is a sign test. When the momentum measure on long Treasuries turns negative, duration itself is the problem, and the strategy steps down to short duration for the remainder of that defensive stretch. LT Gain 300 substitutes TMF for EDV in the first month.

The lock is the important part. Once TDL commits to short duration, it does not go back within the same run, even if long Treasuries rally again. Testing the alternative confirmed why: re-evaluating every month adds roughly 0.7% a year in headline return and roughly doubles the 2000 to 2012 maximum drawdown, driven almost entirely by a single round trip through the late-2008 Treasury whipsaw. Duration is a regime call, not a monthly race. The lock clears on the first Risk On month, and the next defensive episode starts fresh.

Key Enhancement: Smart Leverage (LT Gain 200 and 300)

The base LT Gain is unleveraged. Two variants apply Smart Leverage to the equity position:

• LT Gain 200 substitutes a 2X S&P 500 position (SSO), for up to 200% notional exposure.
• LT Gain 300 substitutes a 3X S&P 500 position (UPRO), for up to 300%.

Smart Leverage is opportunistic, not permanent. It arms only after U.S. large cap has fallen meaningfully from its peak, and it cannot arm and deploy in the same month. It deploys only once momentum has genuinely turned back up. It exits on a momentum reversal, on any Risk Off month, or at a hard 13-month cap.

One trigger, one deployment. When a deployment ends for any reason, the drawdown that armed it is spent. A fresh drawdown is required before leverage can be used again. The strategy does not re-lever on every momentum flip, which is what separates this from a naive rule that simply levers whenever the trend is up.

Leverage is applied to the single most liquid, best-understood exposure in the universe, during the specific conditions where recovery odds have historically been most favorable.

One exception is worth stating plainly rather than leaving in the Step 2 table above. LT Gain and LT Gain 200 hold an unleveraged defensive position throughout. LT Gain 300 does not: in the first month of a defensive run, when the Treasury Duration Limiter has not yet fired, it holds TMF, a 3x long Treasury fund, in place of EDV. That exposure is bounded to a single month and disappears from month two onward, when all three variants hold unleveraged TLT, but within that month LT Gain 300 carries three times the duration risk of the base strategy. See LT Gain 300 for the full treatment.

Neither leveraged variant has a "Prolonging the Magic" rule. LT Gain has no second equity candidate to rotate into, so unlike Global Navigator there is no inter-equity rotation that could keep a deployment alive through an otherwise-disqualifying month.

How LT Gain Compares to Global Navigator

The two strategies are built on the same machinery. LT Gain is Global Navigator with the international dimension removed: the same momentum measure, the same absolute momentum test, the same Treasury Duration Limiter, the same Smart Leverage rules. What is missing is the relative momentum step that lets Global Navigator rotate into international equities when they lead.

That difference cuts both ways, and it is the whole basis for choosing between them:

• LT Gain will track U.S. large cap closely while invested, because that is what it holds. There is no tracking error from a region call that turns out to be wrong.
• LT Gain will lag during international leadership cycles. Global equity leadership rotates on long cycles, and there have been extended stretches where the non-U.S. side was the better place to be. LT Gain has no mechanism to go there.
• LT Gain is simpler to hold and simpler to execute, with one position and one decision.

Investors who want a U.S.-only trend-following position, or who already hold international exposure elsewhere and do not want a strategy making that call for them, are the natural audience for LT Gain. Investors who want the region decision made systematically should look at Global Navigator instead.

Performance Highlights

January 1980 through September 2026, net of trading friction:

	CAGR	Max Drawdown	MAR
LT Gain	+12.7%	-23.4%	0.54
LT Gain 200	+16.0%	-24.1%	0.66
LT Gain 300	+20.4%	-31.9%	0.64
S&P 500	+12.0%	-51.0%	0.24

Two things are worth reading carefully. The S&P 500 row shows what the exit rule is for: LT Gain took roughly half the index's maximum drawdown. And across the three variants, the first doubling of leverage improves MAR while the second does not, which is the pattern to expect rather than an anomaly. See LT Gain 200 and LT Gain 300.

Portfolio Characteristics

• Always a single position. One ETF at 100%, every month, without exception. There is no state in which the strategy holds two things.
• Binary defensiveness. LT Gain is either fully invested or fully defensive. Risk does not come off in stages, and when the signal is wrong it is wrong with the whole portfolio.
• Undiversified by design. The entire return stream is U.S. large cap or Treasuries. This is a concentrated single-market bet with a trend-following exit, not a diversified portfolio, and it should be sized accordingly within a broader plan.
• Duration-aware defense. The Risk Off position is not a fixed bond allocation. TDL steps down to short duration when long duration is itself losing money, which is the specific failure mode that hurt conventional defensive allocations in 2022.
• Low trading frequency. Most months require no action at all. When the signal changes, it changes one position.
• Best suited to tax-deferred accounts. Worth being direct about. Positions are typically held for a matter of months, so realized gains are predominantly short term. The Smart Leverage cap was set at 13 months specifically so that a full-duration deployment clears the one-year holding period, but that is one position in the leveraged variants, not the general case. In a taxable account, plan accordingly.
• Fully mechanical. Every allocation follows from published rules with no discretionary override.
• Scalable. All positions are liquid, exchange-traded funds.

Who It's For

LT Gain is designed for investors who want:

• U.S. large-cap exposure with a clear, testable rule for stepping out of it.
• The simplest possible execution: one fund at a time, one decision a month, often no action for months at a stretch.
• A defensive position that accounts for the possibility that bonds are the thing going wrong.
• A rules-based process with no market-timing judgment calls.
• Optional tactical leverage during high-conviction recovery periods, via LT Gain 200 or 300.

It is likely a poor fit for investors who need current income, who want international exposure managed for them, who want diversification across return streams rather than a single market with an exit, who need risk to come off gradually rather than all at once, or who are investing in a taxable account and are highly sensitive to short-term capital gains. LT Gain 300 in particular is not a starting point for anyone who has not held a leveraged position through a drawdown before.

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Past performance, including backtested results, is not indicative of future results. Backtested performance is hypothetical, does not reflect actual trading, and benefits from hindsight in the selection of strategy rules. Portions of the long-term history rely on reconstructed proxy data for funds that did not exist for the full period. Investors should carefully consider their risk tolerance and consult with a financial advisor.

For the latest details, visit www.DualMomentumSystems.com