Paired Switching by Lewis Glenn
Paired Switching is a binary tactical strategy developed by Lewis A. Glenn and documented in his paper "Simple and Effective Market Timing with Tactical Asset Allocation" published on SSRN. The strategy holds either US equities or long-term Treasury bonds -- never both simultaneously -- rotating into whichever has posted the stronger 3-month trailing return at each month-end evaluation.
Average Allocation
Based on historical average weights across all rebalance periods.
Performance Snapshot
Rolling Returns
| Period | Low | Average | High |
|---|---|---|---|
| 1 Year | -25.9% | +12.0% | +70.3% |
| 3 Year | -4.8% | +11.3% | +34.0% |
| 5 Year | +0.9% | +11.5% | +27.5% |
| 10 Year | +3.2% | +11.8% | +18.6% |
Growth of $10,000
Historical Drawdown
Percentage decline from the portfolio's peak value at each point in time.
Rolling Returns
Annualised return for each rolling period ending on that date.
Annualised return for each 1Y period ending on that date.
Investment Philosophy
Glenn's approach rests on a simple observation: US stocks and long-term government bonds are often negatively correlated, meaning they tend to take turns leading performance over medium-term horizons. Rather than holding a static blend of both, the strategy concentrates fully in whichever is currently the stronger performer. The premise is that even a minimal, rules-based signal applied to two highly liquid, well-understood assets can reduce the time spent holding underperforming positions -- without requiring any forecasting or complex modeling.
Who It's For
This strategy suits investors comfortable with a fully concentrated, all-or-nothing tactical approach. The portfolio is always 100% in one asset class, which requires genuine discipline to follow mechanically -- particularly during periods when the strategy is holding the asset that subsequently underperforms. It is better suited to tax-advantaged accounts given the binary switching nature.
Pros
- Extremely simple: two assets, one monthly decision, a single 3-month lookback
- Avoids holding a lagging asset alongside a leading one, unlike a static balanced portfolio
- Historically switches infrequently -- the signal does not generate a trade every month
- Fully rules-based, removing emotional judgment from allocation decisions
Cons
- 100% concentration in a single asset class at all times means no diversification
- Whipsaw risk when stocks and bonds alternate leadership frequently over short periods
- Long-term Treasury bonds carry significant duration risk and can experience severe drawdowns in rising-rate environments
- Performance is highly sensitive to the choice of lookback period
Technical Notes
The switching signal is evaluated on the last trading day of each month. The asset with the higher 3-month total return is held for the following month. No partial allocation is used -- the position is always fully invested in the selected asset.
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