Macro Uncertainty and Managed Futures: Navigating the Extremes

By Kathryn M. Kaminski, PhD, CAIA®

Highlights

  • Given recent geopolitical events, increased levels of inflation and a push towards rising rates, there is also an increase in macro uncertainty. Investors may expect extreme moves in a number of markets as they navigate the impact of these changes.
  • Asset class performance is plotted for equity, fixed income, currency, commodities, and trend following during rallies and crashes. For bond selloffs, only the US dollar has had strong positive performance. For equity crashes, bonds and the US dollar have tended to have positive returns.
  • Data shows that across extreme environments, trend following tends to increase overall portfolio returns and improve risk-adjusted returns. For example, the Macro-Drivers: Inflation chart plots how trend following has been positive during both low and high inflation surprise times.
  • Put simply, for good or bad, extreme periods drive more persistent trends. When these trends are captured as part of a trend-following strategy, they can provide diversification to an overall portfolio.

Resources

All investing involves risk, including the risk of loss. Investment risk exists with equity, fixed income, and alternative investments. Alternative investments involve unique risks that may be different from those associated with traditional investments, including illiquidity and the potential for amplified losses or gains. Past performance is not necessarily indicative of future results. Diversification does not guarantee a profit or protect against a loss.

This material is provided for informational purposes only and should not be construed as investment advice. The analysis and opinion expressed represent the views of Kathryn Kaminski as of April 2022, and may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted, and actual results may vary.


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