Economy & PolicyExtended setExperimentalNew

Epu Shock Defensives Long

Updated dailyData needs: lowlong only

2016

Baker, S.R., Bloom, N., Davis, S.J. (2016). "Measuring Economic Policy Uncertainty." Quarterly Journal of Economics, 131(4), 1593-1636.

Read the paper →

In plain terms

When the Economic Policy Uncertainty index spikes more than 1 standard deviation above its yearly average, investors rotate into defensive stocks (utilities, staples, gold). Go long the defensive basket for 1-3 months.

How it works

When the Baker-Bloom-Davis EPU index spikes (z > 1.0 vs trailing year), uncertainty-averse investors rotate from cyclical equities toward defensives. The defensive basket (utilities, consumer staples, gold proxies) outperforms by ~2-5% over 30-60 days post-shock.

Live results

0 times picked on its own · 1 times inside a blend (1 beat the stock) · updated 2026-07-06

This strategy is a frequent ingredient in blends that combine a few strategies on one stock. It has contributed to 1 such blended picks (1 of which beat simply holding the stock). Picking it on its own is only one of the ways it shows up.

How its picks scored vs. buy & hold

Each pick is graded on a recent year it was never tuned on, against simply owning the same stock

Where its edge concentrates

Share of picks in each company-size group that beat buy & hold

How often it trades

Active vs. patient. Bars on the left mean it waits for rare setups; bars on the right mean it trades often

Return vs. buy & hold

How much each pick beat or trailed simply owning the stock over the test year (extreme microcap moves trimmed)

Loading substrate evidence…

Data dependencies

Daily prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.
Epu index
A data feed this strategy reads, refreshed on its normal schedule.

Expected edge

Reported return: +2-5% over 30-60d
Tested over: T+1 to T+60d

+2-5% over 30-60d on defensive basket post-EPU spike (BBD 2016).

Example tickers where this is likely to fire

XLU XLP GLD NEE DUK KO PG JNJ

Illustrative only, the signal fires based on the live data, not a fixed list.

Related families

Epu Sector RotationEconomy & Policy

EPU spike → short cyclicals, long defensives.

Gpr Geopolitical RiskEconomy & Policy

GPR spikes → long defense/oil/gold over 1-3 months.

Macro RegimeEconomy & Policy

Uses Fed-funds, term spread, and credit spread (FRED data) to flag risk-off vs risk-on regimes and scale exposure accordingly.

Explore Epu Shock Defensives Long on alphactor.ai

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