What is the DAA Strategy — Rules and Method

The canary idea

Keller and Keuning published DAA in 2018 as a successor to VAA, fixing one thing that bothered them.

In VAA the assets you might hold are also the assets used to detect risk, so the two roles are mixed. DAA separates them: emerging market equities (VWO) and US aggregate bonds (BND) serve only as detectors. The name comes from the canaries miners once carried underground.

The universes

The canary universe is two assets: emerging market equities (VWO) and US aggregate bonds (BND).

The risky universe holds twelve: US large caps, small caps and the Nasdaq 100, Europe, Japan, emerging markets, US REITs, commodities, gold, US long treasuries, high yield corporates and investment grade corporates.

The cash universe is short-term treasuries (SHY), intermediate treasuries (IEF) and investment grade corporates (LQD). A few assets appear in more than one universe, exactly as in the paper.

Momentum is the same 13612W score VAA uses: the 1, 3, 6 and 12-month returns weighted 12, 4, 2 and 1, divided by four — as defined in the paper.

Fewer holdings, not smaller ones

Each month-end we count how many of the two canaries score at or below zero. That count sets the defence level for the month.

With both positive, the top six risky assets are held at one sixth each — fully invested. With one negative, only the top three remain and the other half goes into a single cash asset. With both negative, the risky side is emptied and the allocation is entirely cash.

The key detail is that each position is always one sixth. Defence does not mean trimming every holding a little; it means holding fewer positions, and what is left over becomes cash.

Seen alongside the others

GEM moves between stocks and bonds on a single 12-month return. VAA evacuates entirely when one of four readings turns negative. DAA keeps its detectors separate and steps back in stages.

The three often point the same way, but they diverge a few times a year — and those are the months where their differences in temperament show most clearly.

Reading it on this site

The signal page opens with the allocation for the month. Because several positions are held at once, the two largest are named and the rest are summarised as a count.

In the bar table the two canary assets appear first, in their own block. Their signs explain immediately why half the allocation is in cash, or why only three risky positions remain this month.

Every month's calculation stays available in the archive. Clicking a month in the timeline opens the allocation and the scores exactly as they stood when that month was confirmed.

Worth knowing

This page explains a rule. It is not advice to buy or sell anything; the decision and its consequences are yours.

The paper reports results over past periods. We do not reproduce those figures — we have not verified them.

With this many positions there is a lot to adjust each month. Trading costs and taxes are not included in what you see here.