The record
The $15,000 year: what our rules cost in 2025, and why we kept them
In 2022 the rules stepped aside and finished up 8%. In 2025 the same rules made 3% while SPY made about 18%. Here is the exact cost of that caution, and why you should accept it before you invest a dollar.
Look at your brokerage statement from December 31, 2022. Maybe you remember the knot in your stomach. Stocks were down. Bonds were down. The “balanced” portfolio that was supposed to protect you had fallen with everything else. That was not the agreement.
Now picture 2025 in the model. SPY finished the year up about 18%. The Kairos regime model finished up 3%.
That difference can hurt more than a crash. Losing money in a falling market feels like bad luck. Making 3% while everyone around you makes 18% feels like a personal failure.
This article is about that feeling: the year our model lagged, the year its defenses mattered, and why you cannot have one without the other.
The scorecard: 2020 through 2026 YTD
These numbers are hypothetical. They represent how the rules would have performed out-of-sample from 2020 to today. The rules were locked before the 2020–2026 window; we did not tweak them to fit this data. Execution assumes near-close fills, commissions, and slippage. This is not audited, and it is not a guarantee of future client results.
| Year | Kairos model | SPY (≈) | The gap |
|---|---|---|---|
| 2020 | +72% | +18% | +54 pts |
| 2021 | +59% | +29% | +30 pts |
| 2022 | +8% | −18% | +26 pts |
| 2023 | +95% | +26% | +69 pts |
| 2024 | +26% | +25% | +1 pt |
| 2025 | +3% | +18% | −15 pts |
| 2026 YTD | +20% | +9% | +11 pts |
Do the math yourself. If you started with $100,000 on Jan 1, 2020, compounding these annual returns gets you to roughly $896,000 by the end of the record. Doing the same with SPY gets you to about $252,000. The SPY figures are read off a chart in the source deck, so treat them as approximate.
But averages hide the jagged edges where real investors actually live. To understand if this system fits your brain, you have to stare directly at the two years that define the trade-off: 2022 and 2025.
2022: when the defenses mattered
2022 was the year both halves of a traditional portfolio fell together. SPY fell about 18%. The broad U.S. bond market fell roughly 13%.
The model finished the year up 8%. The source deck attributes that to its defensive posture: five market checks (credit spreads, VIX term structure, breadth, index momentum, tech vs utilities) and the ability to park fully in short-term U.S. T-bills instead of holding stocks or long bonds. We are not going to reconstruct the year trade by trade. The outcome is what the record shows.
On $100,000, that is about $108,000 in the model against about $82,000 in SPY: a gap of roughly $26,000 in a year when bonds offered little protection. No crystal ball. A written rule to step aside when the checks read fragile.
If you were retired in 2022, this wasn’t about beating the market. It was about not being forced to sell shares at a discount to pay your living expenses. It was about sleeping at night.
2025: the year it lagged
Then came 2025.
The source deck describes 2025 as a “steady no-pullback grind” and says the “same defences that hurt in 2025 delivered +8% in 2022.” We are not going to add causes beyond that. A system built to step aside when conditions look fragile pays a price in a market that keeps climbing without the kind of break that rewards caution.
On a $100,000 account, the model grew to $103,000. The index grew to $118,000.
We left $15,000 on the table.
By definition, a defensive system must miss some upside. If you wait for absolute certainty before entering, you will miss the first leg of every rally. If you demand protection against every drop, you will sit out some grind-outs.
In 2025, the cost of that protection was $15,000 per $100,000.
This is the moment many investors quit. Not when they lose money, which they can blame on the Fed. They quit when they feel regret: a brother-in-law’s account up 18%, their own up 3%. They assume the system is broken and turn it off. Leaving after a lag and before the next drop is the same mistake as selling at a bottom.
The hard truth: You cannot buy the 2022 shield without wearing the 2025 blinders. The mechanism that steps aside before a drop is the same mechanism that costs you in a steady climb.
Why “perfect” engineering can’t fix this
You might be thinking: “Can’t you just tweak the code so it tells a fake-out from a real rally?”
Not without fitting the rules to the past, which is the one thing an out-of-sample record forbids. Here is the deeper reason.
The Kairos signal relies on five public data points scored daily. It is not a black box. It is a set of traffic lights. Sometimes the light turns yellow, you stop, and the cross-traffic never comes. You sit there idling while everyone else speeds through the intersection.
That idle time is the premium you pay for having an exit.
In our out-of-sample run, the model was in the market on 59% of days. On the other 41% it was parked in T-bills. When the market rose on those days, the model missed it. In most years that cost was smaller than what the defenses saved. In 2025 it wasn’t.
A system tuned to chase every rally might have caught more of 2025. It would also have had less reason to step aside in 2022. You cannot optimize for maximum upside and maximum defense at the same time.
There is another risk, too. Whipsaws. The signals can be late. We could step out right before a bounce, then step back in right before a drop. Being wrong twice in a row is painful. It hasn’t defined a full year in this record yet, but it is a realistic scenario in a choppy market.
What you need to decide before wiring funds
Most sales pitches end with “Imagine the gains.” We need you to imagine the frustration.
Before you consider Kairos, ask yourself one question: Which pain is worse?
Is it worse to watch a stock-and-bond portfolio fall in a year like 2022, with no rule for leaving? OR Is it worse to watch your account rise 3% in a year like 2025, knowing you left about 15 points on the table?
There is no third option. There is no magic algorithm that delivers +20% every year with zero drawdown. Anyone selling that is lying to you.
If you choose Kairos, you are choosing a process that puts the exit first. You are agreeing to look conservative when the party is hottest. You are betting that over many years, limiting the big losses matters more than catching every gain. That bet can be wrong.
Three rules for surviving the lag
If you move forward, adopt these mental guardrails:
- Expect the lag. Assume there will be more years like 2025, possibly back to back. Write it down now. When it happens, tape this article to your monitor. Do not turn the system off in anger.
- Size it correctly. If losing relative performance keeps you awake, do not put 100% of your net worth in this strategy. Run it as one slice of your portfolio, sized so a year like 2025 is a disappointment, not a setback. Keep the rest in whatever lets you sleep.
- Judge it over several years, not one. A year like 2022 can make the system look like genius. A year like 2025 can make it look broken. Neither is a fair test alone.
The bottom line
The record shows 40.6% a year over this 2020–2026 window. That number includes the very strong years 2020 and 2023, which are no baseline for any future year. It also includes 2025.
Both kinds of year belong in your expectations.
If you need certainty of outcome, walk away. Nobody can give you that. But if you need certainty of process—if you want a written set of rules that removes emotion from the decision to flee a burning building—then the lagging years are the price of admission.
See the full technical breakdown of the out-of-sample methodology or review the complete track record with all caveats.
The short version
- 2022 was the win: The model gained 8% while SPY lost about 18%, in a year when stocks and bonds fell together.
- 2025 was the cost: The model gained 3% while SPY rose 18%. In what the deck calls a steady no-pullback grind, the same defenses cost roughly $15,000 per $100,000.
- The trade-off is mandatory: You cannot engineer a system that avoids all crashes and catches all rallies. Missing some upside is the price of having an exit.
- Psychology is the real test: Many investors abandon a system not because it breaks, but because they cannot tolerate lagging in a rising market. Decide now if you can handle the lag before you invest.
