iQ ETF Recession Hedge Model

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Investment Objective

TheiQ ETF Recession Hedge Model is built around a straightforward question: when equity markets get difficult, where does capital actually find shelter? Rather than holding a static defensive allocation regardless of conditions, this model applies monthly technical signals to ten assets historically associated with risk-off behavior — defensive sectors, precious metals, the U.S. dollar, volatility, and long-duration Treasuries — and only owns them when the signals say to. The model reconstitutes monthly.

Investment Process

The model allocates up to 10% to each of ten ETFs, with each ETF governed by two independent technical strategies representing 5% each. At any given month, each 5% slice is either invested or held in cash (BIL) depending on whether its signal conditions are met. The ten ETFs and what they represent are:

• PPA — Aerospace & Defense

• XLP — Consumer Staples

• XLV — Healthcare

• XLU — Utilities

• GLD — Gold

• SLV — Silver

• UUP — U.S. Dollar

• VIXM — Volatility Mid-Term Futures

• TLH — 10-20 Year U.S. Treasury

• TLT — 20+ Year U.S. Treasury

Each ETF's two strategies use tailored entry and exit signals drawn from a range of technical indicators — including stochastic oscillators, on-balance volume moving averages, money flow index, relative strength measures, RSI, MACD, and volume pattern analysis. Signal logic is specific to each asset's behavior characteristics rather than applied uniformly. A monthly evaluation determines which positions are active and which revert to cash.

Potential Benefits

The ten ETFs cover the full range of how markets historically hedge risk — Treasuries and the dollar for flight-to-safety flows, gold and silver for hard asset protection, VIXM for direct volatility exposure, and defensive sectors that tend to hold up when cyclical parts of the market are breaking down. Each asset hedges through a different mechanism, and together they form a genuinely diversified defensive toolkit.

What separates this from a static defensive allocation is the timing layer. There is a real cost to holding VIXM and long-duration Treasuries in a bull market, and this model doesn't do that. Each 5% slice only deploys when its specific signal conditions are met, and the two-strategy structure per ETF means exposure builds incrementally as conviction increases — partial when one signal confirms, full when both agree.

Potential Risks: Monthly signal evaluation means intra-month deterioration cannot trigger an exit — a position that turns against the portfolio mid-month is held until the next rebalance. VIXM in particular can decay rapidly in low-volatility environments, and holding it outside genuine stress periods carries meaningful cost. Long-duration Treasuries carry significant interest rate sensitivity, and in a rising-rate environment, TLT and TLH may fail to provide the defensive ballast the model is designed to deliver. In a prolonged risk-on environment where none of the ten assets are technically confirmed, the model will sit largely in cash — which protects capital but foregoes any return.