TradeSmith's AI Evolution Was No Accident  | BY KEITH KAPLAN
CEO, TRADESMITH |
Earlier this year, I wrote about the death of traditional investing. I promise, I don’t use those words lightly – and it’s no exaggeration, either. Anyone who’s been investing for more than the past 20 years already knows exactly what I’m talking about. Generations of investors understood that a mix of 60% stocks and 40% bonds was the best way to build a sustainable portfolio. It was gold-standard guidance. When times are good – and that is most of the time – the stocks go up more than the bonds. But when times aren’t so good, the bonds should go up more than the stocks and dull the pain of a bear market. The balance between them should stabilize your long-run returns and makes the drawdowns a lot less painful… so goes the theory, anyway. That worked well... before the turn of the 21st century. But especially over the past few years, it’s broken down. The two big reasons, just as I’ve written before, are: - We just exited an era of ultra-low interest rates and low inflation, resulting in negative real risk-free yields. Even now, with risk-free yields at their highest levels in decades, the real return is scarcely more than 1.5%.
- Stocks and bonds lost their inverse correlation. It used to be that long-term bonds would rise when markets sold off. These days, falling bonds (and surging yields) are a big trigger for stock-market declines. And right now, bonds are falling right alongside stocks.
If the first 24 years of this century saw the 60/40 portfolio on life support, 2025 just pulled the plug. Since President Trump announced the Liberation Day tariffs, both stocks and bonds are falling in roughly the same pattern. The pain in stocks is more severe… but bonds are no place to hide. Take a look at the chart below. The red line shows the performance of the SPDR S&P 500 ETF (SPY) vs. a mock portfolio of 60% SPY and 40% bonds via the iShares 20+ Year Treasury Bond ETF (TLT). “60/40” is the blue line: 
We can see more examples of 60/40 no longer doing what it’s supposed to and reduce your drawdowns. Here’s how it stacked up against the S&P 500 in 2020 and 2022: 
60/40 fell only a little bit less during the pandemic crash. But it missed out on a huge part of the recovery… and thus underperformed during the bear market: 
So, that leaves us stuck. 60/40 no longer works. Being 100% stocks is too risky for most of us. And cash is being eaten away by inflation. We have to find a new way to make money in markets. Fortunately, finding new ways to make money in the markets is what TradeSmith is all about. The Funny Thing About TradeSmith There’s a funny thing about TradeSmith’s history… This company was founded 20 years ago. And that founding coincided with the shift in market mechanics that we’re talking about today. We started with TradeStops – our easy-to-use risk management system that takes the emotion out of investing. And since then, we’ve gone on to pioneer dozens of different tools that help you take advantage of a 21st century market. What do I mean by that? Well, let’s just reflect on what we’ve seen over the past 25 years. The century began with the peak euphoria and bursting of the dot-com bubble. That was a tremendously volatile moment in market history, with the bust taking the tech-heavy Nasdaq 100 down more than 80% peak-to-trough. But in the years to follow, the technology that drove the dot-com bubble didn’t go away. Internet companies that survived – thrived, posting monumental returns in the following decades. Then came the Great Financial Crisis, a crash course in leverage. An overleveraged financial system, this time exposed to housing by way of complicated debt instruments, caused a stock market crash and a ton of volatility. This era also saw the greatest damage done to the “40” end of the 60/40 portfolio, with ultra-low yields causing long-term government debt to return a measly 37% over the next decade. 
More recently COVID showed the vulnerability of markets and simultaneously the importance of technology in our everyday lives. The 2023 AI boom cemented technology as the beating heart of our economy. And today, the new tariff regime signaling a great transition from globalization to a more isolationist world economic policy… with plenty of swings as a result. What are the core themes here? Volatility… Technology… and intrusive monetary policy. That’s the 21st century so far in a nutshell. We’re in a loop of rapid, extreme booms and busts, with shorter spans between them. That is no time to depend on a passive 60/40 strategy. Instead, you need to actively utilize the great equalizer, technology, in your investing. And that’s why the story of TradeSmith is so important. We, as a technology-driven financial research firm, have been building for this exact moment. We’ve come a long way from the simple first iteration of TradeStops. TradeSmith has become the premier developer of financial software and publisher of financial research that uses that software. We have spent decades creating an investment system that works in such a chaotic, disruptive world. And now, today, our readers and users have never been better prepared to ditch the failing 60/40 approach. Our platform hosts tons of useful tools for trading in this new regime. - Trade Cycles helps you understand the market from a seasonal cyclical perspective, making it easier than ever to time those rapid booms and busts…
- Options360 helps you easily find the best options plays for every market move…
- And our Ideas by TradeSmith software constantly seeks out the best short-term trading opportunities and delivers them to you instantly.
But the one I’m perhaps most proud of, especially right now, is Predictive Alpha – because it is AI-based. So, it only gets better with time. Two years ago, we debuted Predictive Alpha as one of, if not the first AI trading system on the market. And the most recent release of the Predictive Alpha model has taken it to a new level. Not only does it constantly adapt to new information, updating with every new datapoint that hits our system… With that new information we’ve created the Prime projection – an optimized trading strategy that uses the best, most relevant data to give you a high-odds trading idea. I just pulled up the most recent track record of closed Predictive Alpha projections. We get a new track record like this every single day, and every single one of these rows feeds back into the algorithm. Let’s look at just one projection, in genomics company GeneDx Holdings (WGS)… Right away, this is a small-cap genetic editing stock: It’s the kind of thing you’d expect got hit pretty hard over the last month. And most biopharma stocks did. You can see how something like the Global X Genomics and Biotechnology ETF (GNOM) was down about 13% at one point. But the projection for WGS was not down. It was up. Predictive Alpha projected WGS would be up from $96.71 on March 20 to $101.69 over the next 18 days, its Prime period. Based on our data, Predictive Alpha’s historical directional accuracy for WGS is just under 65%. And across all PA projections, it has hit the projected price 70% of the time. So, there was a pretty solid chance WGS would hit that price. Again, this was all before the tariff-driven volatility. Before anyone would know the struggles that would face the tech sector. So, you’d be forgiven for doubting even such a firm forecast. But as of April 15, the end of the projection period, WGS had risen a little further than the projection – to $102.22, a difference of about 5%. If you’d used PA to trade this stock, you would’ve made a gain of just under $6 per share on a biotech stock during one of the most volatile periods for the sector in a very long time. Let’s look at another projection in Fair Isaac Corp (FICO)… Also on March 20, PA projected FICO would be up from $1,853.46 to $1,930.51 at the end of its Prime projection – also 18 days. The price closed on April 15 at $1,923.93, just a hair under the projection. Or look at Agree Realty Corp (ADC). Its 20-day Prime projection forecasted the stock to rise from $76.26 to $79.03 starting on March 20. Where did it close on April 17? At $79.05, just two cents off. Right there is three stocks that rose through one of the worst and fastest selloffs any of us have ever seen. The Predictive Alpha model did not know what would happen on Liberation Day. But it didn’t have to. It doesn’t know where stocks will be in one year from now, either – because it doesn’t have to. Predictive Alpha is representative of what TradeSmith has always been working to become. It’s a place built for the 21st century market – where technology and short-term trading combine to find the biggest, best opportunities. Where you can find shelter from the rapid boom and bust cycles and rampant government intervention into the market. This was no accident. This is exactly where we wanted to take the company, and this latest release of Predictive Alpha is our solution to the 21st century problem. There are thousands more examples just like the ones I mentioned earlier. And after seeing all of its remarkable forecasts, I couldn’t wait to get online for one of my free demos to show it off to the world. During this particular one, my AI Predictive Power Event, I showed even more of Predictive Alpha’s remarkable capabilities and how everyday folks can use these projections to target winners and avoid losers to make huge money in the markets, completely rewriting their financial future. It was an incredible presentation, one of the biggest – if not the biggest – in our company’s history… In fact, it was so remarkable, we predict that using forecasts from AI... rather than brokers, financial analysts, Wall Street or the media... will soon make other forms of investing obsolete, too. Click here to watch the replay now because it includes a 65% discount that expires today. Viewers of The AI Predictive Power Event can also get a bonus feature that’s easily worth $4,000 for how it combines with Predictive Alpha to help you target both short-term and long-term moves. Check it out, and I’ll see you next time. All the best, 
Keith Kaplan
CEO, TradeSmith | 
Tidak ada komentar:
Posting Komentar