Summary GMOM shifted from stocks to bonds in late August, but was too late to protect itself from the summer market plunge. GMOM missed the October snap-back relay in stocks, but has recently repositioned itself to be overweight in equities. The recent whipsaws has not been kind to GMOM, but it may regain its lustre in strongly trending markets. The Cambria Global Momentum ETF (NYSEARCA: GMOM ) is an actively managed ETF that seeks to exploit the momentum factor across different asset classes. Essentially, GMOM invests in the top 33% of a target universe of 50 ETFs based on measures of trailing momentum and trend. Assets include domestic and foreign stocks, bonds, real estate, commodities and currencies. The fund rebalances monthly into ETFs with strong momentum and are in an uptrend over the medium term of approximately 12 months with systematic rules for entry and exit. Seeking Alpha author Left Banker has penned an excellent pair of articles describing the construction of this ETF, and thus these details will not be rehashed here. Instead, this article seeks to highlight the fact that GMOM has just recently switched from a bond-heavy portfolio back into stocks. Locating the previous switch to bonds In his last feature article on GMOM in Feb. 2nd, 2015, Left Banker found that GMOM was broadly diversified across numerous asset classes, with about 46% in equity, 31% in bonds, 18% in real estate (including mREITs) and 6% in commodities. Fast-forward to Nov. 3rd, 2015, and the situation is drastically different. Nearly 94% of the portfolio was in bonds , with the remaining 6% or so in REITs. GMOM holdings on Nov. 3rd, 2015 iShares 7-10 Year Treasury Bond ETF (NYSEARCA: IEF ) 17.56% iShares 3-7 Year Treasury Bond ETF (NYSEARCA: IEI ) 17.12% Vanguard Short-Term Bond ETF (NYSEARCA: BSV ) 17.08% iShares 1-3 Year Treasury Bond ETF (NYSEARCA: SHY ) 12.11% Vanguard Total Bond Market ETF (NYSEARCA: BND ) 10.93% Vanguard Total International Bond ETF (NASDAQ: BNDX ) 6.44% iShares Residential Real Estate Capped ETF (NYSEARCA: REZ ) 6.22% Vanguard Short-Term Corporate Bond ETF (NASDAQ: VCSH ) 6.01% iShares MBS ETF (NYSEARCA: MBB ) 6.00% Total 99.47% As GMOM does not publish its historical holdings, I do not know the exact time that it made the switch from bonds to stocks. However, given the significant underperformance of both U.S. (the SPDR S&P 500 Trust ETF (NYSEARCA: SPY )) and international stocks (the iShares MSCI ACWI ex-U.S. Index ETF (NASDAQ: ACWX )) stocks compared to their respective bond counterparts, the Vanguard Total Bond Market ETF [BND] and the Vanguard Total International Bond ETF [BNDX] over the summer, I infer that change to the better-performing bond ETFs was made sometime during those months. To narrow down the precise timing of the switch further, I compared the total performance of GMOM with SPY and BND over the past three months. We can see that the stock market plunge in late August was acutely felt by GMOM, suggesting that GMOM was still heavily invested in equities at that time. However, GMOM did not track the market fluctuations experienced by SPY in the month of September, nor the snap-back rally in stocks in October. This suggests that the switch from equities to bonds took place sometime at the start of September. We can see from the graph above that while moving to a bond-heavy portfolio protected GMOM from the market gyrations experienced by SPY in September, it also caused GMOM to miss out on the fantastic rally in stocks the following month. This illustrates a general observation: momentum strategies tend to underperform in whipsaw situations. A similar set of circumstances was chronicled for the AlphaClone Alternative Alpha ETF (NYSEARCA: ALFA ), which uses the 200-day MA in order to time its hedges (which is a type of momentum strategy), in my recent article entitled ” ALFA Underwhelms As Hedge Fund Darlings Crater Plus An Untimely Hedge .” From bonds back to stocks Checking the holdings of GMOM a few days later, I discovered that a massive shift had taken place in the constituents of this ETF. The portfolio had shifted from 94% bonds to only 29%. REITs increased from 6% to 17%. Stocks increased from a measly 0% to 53% (70% if you include REITs as stocks). GMOM holdings on Nov. 6th, 2015 iShares Global Tech ETF (NYSEARCA: IXN ) 10.61% iShares Global Consumer Discretionary ETF (NYSEARCA: RXI ) 10.60% Vanguard REIT ETF (NYSEARCA: VNQ ) 10.60% Cambria Shareholder Yield ETF (NYSEARCA: SYLD ) 10.59% iShares Global Consumer Staples ETF (NYSEARCA: KXI ) 10.59% Vanguard Total Stock Market ETF (NYSEARCA: VTI ) 10.57% PowerShares Emerging Markets Sovereign Debt Portfolio ETF (NYSEARCA: PCY ) 10.56% Vanguard Total International Bond ETF BNDX 6.43% iShares Residential Real Estate Capped ETF REZ 6.17% Vanguard Short-Term Corporate Bond ETF VCSH 6.02% iShares MBS ETF MBB 6.00% Total 98.73% The recent change in the portfolio is also shown graphically below. Obviously, the recent move back into equities is a direct consequence of the ferocious rally in the stock market over the past month and a half. With stocks knocking again on the door of all-time highs, one has to ask the question, is this really the best time to be overweight equities? If you answered “yes” to that question, then you are likely a momentum investor, and GMOM might be an ideal fund for you. If you answered “no,” you would do well to sell GMOM now that it has shifted again back into stocks (and you should also ask yourself why you were invested in this fund in the first place?). Summary The recent whipsaws in the stocks, and to a lesser extend bond, market has not been kind to a momentum fund such as GMOM. Indeed, while having performed comparably with U.S. and international stocks and bonds in the first six months or so of its lifetime since inception, it now trails all four major asset classes by a wide margin. If this whipsaw behavior were to continue, GMOM will likely continue to underperform. On the hand, strong trending markets (both bull and bear) in various asset classes should allow GMOM to focus on what it does best: exploiting the momentum premium. GMOM Total Return Price data by YCharts For more information about other momentum ETFs, see my previous articles ” Comparing 4 Tactical/Momentum ETFs ” and ” An Update On 4 Tactical/Momentum ETFs “.