US Stocks have hit fresh 2010 highs today on the back of a +200 point gain in the Dow… .and Managed Futures (generally speaking) are loving it, as Metals, Softs, and Grains are also up between +2% and +5%.

Managed Futures are often painted as an investment which performs best when the stock market is going down (witness recent history with the gains in 2008, and losses for managed futures in 2009 when stocks were rising); but this isn’t necessarily a fair reputation.

Sure, managed futures have done very well historically when stocks go down,  but that has more to do with their ability to go both long and short global markets and their long volatility profile – not because they bet on stocks falling. We often confuse non correlation with negative correlation; thinking that managed futures non correlation to stocks means they go up when stocks go down, and down when stocks go up. But that pattern describes negative correlation (roughly defined as ‘the opposite happens’), versus non correlation (roughly defined as ‘anything could happen’).

While it is fun to cheer for the stock market’s demise from time to time, and even more fun to profit from it….the ability of managed futures to rally over the past 2.5 months while stocks have risen 10% shows that the two asset classes can at times play nice (can at times play nice = a nice alternative definition of non correlation).  We’ll surely have another chance sometime soon to cheer the stock market lower, pitting managed futures against stocks once again…..so for now, let’s enjoy a market in which everyone can be happy (well, maybe not option sellers).

Past performance is not necessarily indicative of future results