Alpha Report
S&P 500
Composite Signal
2022–2026

1. Executive Summary

Signal Coverage: S&P 500

S&P 500 Macro Review:

• 2022: The S&P 500 futures fell about 20% as inflation peaked and the Federal Reserve raised rates by 4.25 points from March, with the war in Ukraine adding an energy shock. The year was a textbook bear market: the high came in the first week of January and the low on 11 October, and analysts widely called it the end of the zero-rate regime.
• 2023: The index recovered about 26%, from a January low to a late-December high, through the March regional-bank failures and a Fed that held rates at 5.25–5.50% from July. The AI-led rally in the largest technology names drove the gains, and a Q4 drop in yields on expected rate cuts pushed it back near record territory.
• 2024: Another strong year, about +25%, with the index setting repeated all-time highs as the Fed began cutting in September and AI investment continued. The early-August volatility spike from the unwinding of the yen carry trade was brief; after the November election the index ended near its December record.
• 2025: About +17% despite an April shock: the tariff announcements of early April drove the year's low on 8 April before a fast recovery. With the Fed cutting again from September, the index finished the year at a record high, leaving valuations near historical extremes.
• 2026 (to 28 Sep): About +12%. The Iran conflict and the closure of the Strait of Hormuz sent oil toward $120 and the index to its 2026 low on 30 March; it then had its strongest quarter since 2020 (Q2 about +14%), led by semiconductors, and set new records in August and September before easing as Gulf tensions resurfaced.

Signal Performance Overview:

• 2022: In a falling market the signal returned +6.4% (Sharpe 0.91) with a −4.4% maximum drawdown, trading 41% of decision slots at a 54% hit rate. Both sides contributed (long +4.8%, short +2.6%), so it profited from intraday swings rather than simply riding the decline.
• 2023: +5.4% (Sharpe 1.22), with the highest participation (51%) and hit rate (59%) of the five years. Almost all of it came from long positions (+6.2%), in line with the year's rally.
• 2024: The one losing year: −3.3% (Sharpe −1.17), with a hit rate below 50% (48%). The market rose steadily (+25%) but the signal's long side made nothing and its shorts lost 2.2%, so it did not follow the uptrend; the weakness was concentrated in 24Q4 (Sharpe −4.5).
• 2025: Back to +5.4% (Sharpe 0.67), mainly from longs (+4.9%), with most of the gain in 25Q2 as it caught the rebound after the April low. It lost in 25Q4 when the market's advance slowed.
• 2026 (F1, to 28 Sep): +3.0% (Sharpe 1.29), its best risk-adjusted year of the walk-forward, with the shallowest drawdown of the five years (−2.3%). It traded less (36% of slots), split its gains between shorts and longs, and was positive in every quarter, including the March sell-off.

2. Trading Strategy

In order to produce the metrics below we use the signal in combination with the trading strategy below:

• Entry positions: every 5 minutes between 09:45 and 15:25 ET (69 possible openings per day) we take a long, short or no position. Each position is split into 5 parts, executed on each minute of the 5 minutes after the decision. No sizing adjustment.
• Exit positions: each decision's position is closed between 15:55 and 16:00 ET, its five parts over the five minutes.
• Costs: 0.50 bp per side, 1.0 bp round trip (ES). Extra exchange/clearing fees not included.
• Contract series & roll: Front month quarterly contract (Mar, Jun, Sep, Dec). Switch at the open 5 trading days before expiration (the third Friday of the contract month): stop trading the expiring contract and start trading the next.

3. Model Training Data and Timeframe

Each year of Section 4 is scored by the committee of its own walk-forward fold, trained and validated only on data before that year:

4. Performance Metrics: walk-forward, 2022 – 2026

4.1 Return and Risk Metrics

Quarterly and annual return, risk-adjusted performance and drawdown for the trading strategy defined in Section 2. Sharpe is per session on fixed capital. 2026 runs to 2026-09-28.

Table 1: Quarterly and Annual Metrics

Figure 1: Cumulative equity from $1,000,000, quarterly returns compounded from 22Q1 (out-of-sample)

The curve compounds the quarterly returns from $1,000,000 for illustration. The strategy metrics in this report assume fixed capital, so the ending value is not the sum of the quarterly returns.

4.2 Participation, Recall and Effective Leverage

Quarterly and annual view of how often the signal trades, how many of the realised moves it captures, and how much of the notional capital is deployed on average.

Table 2: Quarterly and Annual Participation, Recall and Effective Leverage

5. Next Steps

Download historical predictions using the Client API and confirm performance in your own test harness:

• Sign-up: Create account
• API Documentation: https://quantumsignals.ai/documentation

6. Contact

Please reach out with any questions or comments at: info[at]quantumsignals.ai