The Quantopian Podcast Quant Radio: Pragmatic Asset Allocation - Simple Rules for Complex Times
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May 29, 2025 Explore the concept of Pragmatic Asset Allocation (PAA) as a balanced approach between passive and active investing. The discussion highlights how this rules-based strategy adapts to macroeconomic turbulence, including yield curve inversions. Learn about investments in gold versus equities and the emerging markets shift. Discover how strategic flexibility can enhance long-term investment decisions amidst changing economic conditions. This conversation equips you with insights on navigating market volatility and capital protection.
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Yield Curve Inversion Importance
- Yield curve inversion signals economic caution by showing higher short-term yields than long-term yields.
- This inversion often predicts slower growth or recessions, which was observed persistently from 2022 into 2025.
Original PAA's Defensive Success
- The original PAA model held 50% in gold and significant cash in early 2025, avoiding stocks.
- This defensive positioning proved profitable by skipping the stock market dip during volatility.
Amended PAA Equity Tilt Story
- The amended PAA version treats the yield curve inversion as valid for only 12 months.
- It favored equities in early 2025, leading to underperformance amid market turbulence compared to the original model.