BTS Strength Zones — Country ETFs Backtest Results
Backtested Strategies has published BTS Strength Zones — Country ETFs Backtest, a new report on a long-only tactical allocation model applied to a fixed universe of 39 country ETFs. Over the 2003–2025 whole-calendar-year report window, the complete modeled BTS Strength Zones portfolio produced 24.8% CAGR versus 11.3% for buy-and-hold SPY. Over that 23-year period, a $10,000 starting value grew to $1,616,487 for the strategy and $116,729 for SPY. Maximum drawdown was -31.3% versus -55.2% for SPY, while volatility was slightly higher at 19.0% versus 18.7%.
BTS Strength Zones — Country ETFs Backtest applies the same strategy rules used across the BTS Zones series and the same governing BTS Strength Zone formulas and rules used across all BTS Heatmaps. That common design supports direct comparison with other BTS Zones backtests without changing the governing strategy rules or heatmap formulas.
Results
The chart shows steady long-term separation from SPY despite setbacks in 2008, 2018, 2020, and 2022. The strategy finished far ahead of the benchmark, but its gains were interrupted by prolonged drawdowns and periods of relative lag.
Time in Market was 98.0%, indicating near-continuous equity exposure rather than a defensive cash posture, while volatility was slightly higher at 19.0% versus 18.7% for SPY.
The drawdown profile was materially better than the benchmark’s but still demanding. Maximum drawdown reached -31.3%, versus -55.2% for SPY. The strategy recovered its 2020 peak by December 9, 2020, while SPY’s financial-crisis peak was not recovered until August 16, 2012. The strategy’s longest underwater period lasted 519 calendar days during 2022–2023, compared with 1,773 days for SPY. The evidence supports shallower catastrophic loss and a shorter recovery burden, not immunity from prolonged drawdowns.
The strategy outpaced SPY in both the up-year and selected down-year diagnostics. In SPY up years, BTS Strength Zones produced 30.0% filtered CAGR versus 17.1% for SPY, with a smaller worst within-year drawdown but higher volatility. Across the three SPY down years—2008, 2018, and 2022—the strategy produced -5.0% filtered CAGR versus -21.0% for SPY, with materially lower volatility and drawdown. The strategy still lost money across those selected down years, so the evidence supports downside containment rather than positive-return protection.
The full-period result was supported across most, but not all, rolling windows. BTS Strength Zones beat SPY on CAGR in 85.5% of rolling three-year windows and 90.3% of rolling five-year windows, while producing a higher Sharpe ratio in 81.7% and 91.7%, respectively. Smaller maximum drawdowns appeared in 63.9% of three-year windows and 79.7% of five-year windows. The strategy’s worst rolling CAGR remained positive at 3.4% over three years and 7.3% over five years, but periods of relative underperformance still occurred.
Methodology
The model uses a fixed universe of 39 country ETFs, 30 of which have one or more published BTS Strength Zones. Each ETF becomes eligible at the first true strategy Open of its first full calendar year, so the opportunity set expands as later-launched funds acquire sufficient source history. A portfolio-level VIX 50/35 regime determines whether an ETF associated with an active BTS Strength Zone may enter the portfolio.
Once admitted, the ETF remains held through the scheduled end of its BTS Strength Zone, and entered ETFs are equal-weighted at target-decision events. When no BTS Strength Zone is entered, the portfolio holds SPY while the regime is ON and SHY while it is OFF. ETFs without a published BTS Strength Zone receive no offensive allocation.
Reported performance reflects the full modeled portfolio, including entered ETFs and SPY/SHY fallback holdings.
Backtest results follow the BTS Methodology, which sets common conventions for data and calendar alignment, execution pricing, missing-data and end-of-range handling, trading costs and spread-aware slippage, portfolio accounting, cash and dividend treatment, benchmark conventions, reporting windows, performance metric calculations, and, where reported, market-capacity screening. Strategy-specific rules, universes, eligibility, timing, sizing, and constraints are defined in each report.
Caveats
The opportunity set was not constant throughout the report window. Seventeen country ETFs were eligible at inception, while later funds became eligible through 2016 as their true source histories began. Earlier and later portions of the backtest therefore reflect different sets of available country exposures.
The published BTS Strength Zones were defined from historical data through 2025. The reported result is an in-sample historical analysis, not an out-of-sample validation.
Implementation burden remained meaningful at 174.6 modeled executions per year after excluding the terminal reporting close. Equal weighting may also produce correlated exposure across related regions, currencies, commodities, and global risk factors when multiple BTS Strength Zones overlap.
The regime figures are filtered-year diagnostics, not continuous-window backtest results. The rolling record was strong but not universal: the strategy experienced relative lags, including a 9.3-percentage-point annualized lag in its weakest rolling three-year comparison with SPY.
Market capacity
The market-capacity screen produced an overall ORANGE status at the modeled account scale. All 4,007 requested execution events were assessable, giving 100.00% event-count and gross-notional coverage. Of those events, 96.08% were classified as market capacity likely, 1.87% as questionable, and 2.05% as unlikely. The 2.05% unlikely-event share triggered the ORANGE result, while the 3.92% combined non-likely share remained within the GREEN threshold.
The 82 unlikely events were distributed across eight ETFs rather than concentrated in one symbol. The most constrained event involved KSA on March 28, 2016, when modeled gross shares equaled 272.97% of the highest daily volume observed during the prior 21 trading sessions. The capacity limitation was therefore material and distributed across several country exposures.
The screen compares modeled shares with recent peak volume; it does not estimate typical daily liquidity, distinguish continuous-session volume from auction volume, or model bid-ask spreads, order-book depth, market impact, intraday liquidity, or realized slippage. The ORANGE status should be read as a warning that some modeled trades were large relative to the available volume record at the tested account scale.
Read the report
The full BTS Strength Zones — Country ETFs Backtest report includes preview and full-period metrics, complete strategy rules and mechanics, equity-curve and drawdown-profile charts, caution flags, failure-mode analysis, market-capacity results, monthly and annual returns, SPY up-year and down-year diagnostics, rolling-window results, pseudocode, and implementation guardrails.
About Backtested Strategies
Backtested Strategies (BTS), operated by Marquantex LLC, is a financial research publisher built around the BTS Methodology, a standardized framework for testing trading strategies with stated rules, consistent assumptions, benchmark discipline, cost and slippage treatment, portfolio accounting, and clear interpretation so readers can evaluate market ideas through evidence rather than hype or unsupported claims.