This week’s newsletter is out, and following last week’s call to consider managed futures in light of global economic tensions is nicely complimented by a more in depth look at the asset class’ most prominent strategy: trend following.
We mentioned in our blog post last week titled Here’s hoping the markets “Go to Zero” that we half-jokingly expected stocks and crude oil to be up 3% this week because we had the audacity to say we wanted them to go lower, and wouldn’t you know it – we finish today with gains of over 1.50% across stocks and Crude.
While we still hope the markets go to zero – we don’t think it will happen without the bulls trying to push it back to the upside a few times. We just don’t want the moves higher to be significant enough to reverse the trend lower.
You see, even though managed futures growth over the past two decades has seen the dawn of other strategy types within the asset class– like options, agriculture, currency, specialty (fixed income, stock index, metals, etc), spread, discretionary, and multi-strategy approaches– trend following is still the bread and butter of the world of managed futures. In fact, in our recent breakdown of the CTA industry, trend following was far and away the dominant strategy. However, not all trend followers necessarily cut from the same cloth. We’ve mentioned more than a few times that there are numerous ways to skin the trend following cat (sorry cat lovers).