Equity investing rewards patience but surviving major drawdowns is often what determines long-term outcomes. Over the past 25 years, investors have experienced multiple severe equity market declines: the Dot-Com bust, the Global Financial Crisis, the COVID-19 shock, the 2018 correction and the 2022 inflation-driven selloff. In each case, losses were swift, deep and challenging to mitigate.

The Adaptive Moving Average framework was built to address that reality: participate in sustained uptrends while seeking to reduce exposure during prolonged downturns.

Below, we examine how the U.S. Adaptive Moving Average and International Adaptive Moving Average Indexes are designed.

Designing the WisdomTree Adaptive Moving Average Indexes

A Buffered 200-Day Trend Signal

The U.S. and International indexes use a moving average crossover applied to the WisdomTree 500 and WisdomTree International LargeCap Indexes respectively.

• A long position is initiated when the index closes 1% above its 200-day simple moving average (SMA) for two consecutive trading days.
• The position is exited when the index closes below 1% below its 200-day SMA for two consecutive trading days.
• Signals are evaluated daily and implemented with a two-day lag.

The ±1% buffer and two-day confirmation are designed to reduce whipsaw trades around the long-term trend.

A Breadth Overlay for Faster Re-Entry

To enhance responsiveness during market stress, a breadth overlay is incorporated.

This measure tracks the percentage of index constituents trading above their own 200-day SMAs.

• When the strategy is out of equities and breadth rises above 15%, a long position is initiated.
• A 5% stop-loss is applied to this position.
• If triggered, the position is exited at the close of the next trading day.

A Visual Representation of the SMA Indicator

As seen in the figures below, the 200 day SMA indicator effectively captures the long term uptrends and downtrends. The signal is effective in identifying market regimes helping the strategy pivot accordingly. The daily signal review helps the strategy react to market events quicker, making the strategy agile and better suited for volatile markets.

• An index falling below its 200-day SMA could indicate the development of a long-term negative trend
• An index rising above its 200-day SMA could indicate an upcoming rally

Figure 1: Adaptive Moving Strategy in Practice: WisdomTree 500 Total Return Index

Figure 2: Adaptive Moving Strategy in Practice: WisdomTree International 500 Total Return Index

Inherently the 200 day SMA can be slow moving in times of quicker recovery leading to investors missing out on the crucial recovery period. In order to mitigate this, the WisdomTree adaptive moving average strategies deploy the breadth overlay allowing greater participation in market recoveries.

A Disciplined Approach to Changing Markets—The WisdomTree Adaptive Moving Average ETFs

WisdomTree is introducing two new ETFs that leverage the above strategies within an ETF wrapper.

1. WisdomTree U.S. Adaptive Moving Average Fund (WAMA)
2. WisdomTree International Adaptive Moving Average Fund (WIMA)

Markets will continue to cycle through expansion and contraction. What matters is how portfolios respond.

The Adaptive Moving Average Funds seek to:

• Participate in sustained uptrends
• Systematically reduce exposure during prolonged downturns
• Incorporate breadth signals for improved recovery participation
• Remove emotion from allocation decisions

For investors seeking equity exposure that adapts to broader market trends, this rules-based approach offers a transparent and repeatable framework designed to balance participation and downside mitigation across market cycles.