What Is Dual Momentum

Dual Momentum is a concept organized and popularized by investment researcher Gary Antonacci in his 2014 book "Dual Momentum Investing." As the name says, it combines two kinds of momentum.

Relative momentum: You compare several assets against each other and pick the one with the higher recent return. (e.g., U.S. stocks vs. foreign stocks)

Absolute momentum: You check whether the chosen asset also beat a risk-free asset (cash / short-term Treasuries). This works as a 'trend filter,' so if the market itself is heading downhill, you retreat entirely to a safe asset.

In other words, the core is asking both 'which asset is strong (relative)' and 'is this a time to take risk (absolute)' at the same time.

Antonacci's flagship rule-based model is GEM (Global Equity Momentum). It runs on just three ETFs and a single check once a month.

(1) At each month-end, you compare the last 12 months' U.S. stock (S&P 500) return with the return on short-term Treasuries (cash). → If cash did better, you avoid risk and move to intermediate-term bonds (absolute momentum).

(2) If U.S. stocks did better than cash, you then pick whichever of U.S. stocks and foreign stocks had the higher trailing 12-month return (relative momentum).

So it judges in the order 'stocks vs. cash → U.S. vs. foreign,' aiming to ride strong stocks in an uptrend and step back to bonds in a downtrend.

The appeal of dual momentum is that it tries to avoid large drawdowns.

For example, the GEM approach is tallied as having returned roughly +20% during the 1973–74 bear market, while over the same period the S&P 500 fell more than 40%. That was thanks to the absolute momentum filter pulling out of stocks and into bonds.

This design of 'evacuating to safe assets when the trend breaks' is an attempt to reduce large drawdowns and make long-term holding easier to endure psychologically.

Dual momentum is not a cure-all and has clear weaknesses.

Whipsaw: In stretches where signals are ambiguous, it switches back and forth, burning trading costs and missing part of the upside. In fact, several GEM specifications experienced whipsaws in late 2015 to early 2016.

Recent underperformance: Across several stretches since the mid-2010s, GEM lagged simply holding the S&P 500. Defensive strategies pay a price in strong bull markets.

Concern over over-optimization: There is also debate over whether parameters like the 12-month window were fitted to past data.

So dual momentum is better understood not as a 'guaranteed winning formula,' but as one approach that tries to reduce emotion with rules.