S&P 500: trend-following strategy vs buy & hold
Equities · tracked with SPDR S&P 500 ETF (SPY)
The S&P 500 holds the 500 largest listed US companies and covers roughly 80% of the value of the US stock market. It is the benchmark most professional investors are measured against, and SPY — launched in 1993 — is the oldest and most traded fund that tracks it.
Growth of 100 since 1993
Strategy Alpha vs buy & hold · data to 2026-06Hypothetical backtest incl. estimated trading costs; T-bills when out of the market. Shown with the same 3-month delay as a Free account — the current signal is in the Research Terminal.
What drives S&P 500
Over the long run the index follows corporate earnings, which grow with the US economy, productivity and inflation. In the short run it is moved by interest rates, liquidity and sentiment. Because it is weighted by company size, a handful of mega-caps can dominate its returns for years.
How a trend-following strategy handles S&P 500
The S&P 500 has rewarded patient holders, but twice this century it fell by roughly half (2000–2002 and 2008–2009). A trend-following approach tries to keep most of the long climbs while stepping aside during those extended declines — accepting that it will sometimes sell near a low and buy back a little higher.
Our Strategy Alpha applies the same simple, rules-based trend filter to every market: invested while the trend is up, in Treasury bills while it is down, checked once a month. It is not a forecast — it is a discipline that aims to keep most of the long climbs and sit out the deepest drawdowns.
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Educational content, not investment advice. Backtested results are hypothetical and do not guarantee future results. Disclaimer.