Archives for August 2025

30/08/2025 by Naomi

The era of easy money is over, with capital scarcity and soaring debt reshaping the way markets operate.
Louis Gave warns that fiscal dominance, fragile safety nets, and shifting geopolitics demand a new playbook for investors.
Emerging markets like India and Mexico could be the surprise winners in this new global order.

For forty years, investing had a simple rhythm. Each downturn was met with lower interest rates, more liquidity, and a renewed confidence that central banks could smooth the ride. Investors learned that patience was rewarded and that declines were temporary, but that rhythm might be breaking.

We’re moving into a world where capital is scarce, deficits matter, and governments are competing with one another for money. Louis-Vincent Gave, Founding Partner & CEO at Gavekal, calls this the age of fiscal dominance, when the weight of public debt dictates what central banks can and cannot do. It sounds like a policy debate, but it’s much more significant because it alters the foundation of how markets operate and how portfolios must be constructed.

The world of abundance is fading, and the world of scarcity is emerging. That transition is showing up in ways that are already reshaping the economy.

A Fiscal Delusion About to Snap

The United States is living through what feels like a free party. Government borrowing has soared, and for a time, it seemed painless. Like tequila shots, it feels good until it doesn’t. Trillions of dollars in new debt were absorbed because investors assumed the old rules applied: the Fed would keep yields low, the dollar would stay strong, and buyers would always show up.

But the math is harder now. Debt is rising faster than growth, and interest costs are eating a larger share of tax revenue. Fiscal dominance means that the market, rather than the Fed, will set the price of money. When the bond market decides it needs a higher yield, there may be no easy escape route. The moment the delusion snaps, it will not be a slow adjustment. It will be sudden and jarring, like waking up the morning after the party.

Tariffs Quietly Squeezing the Job Engine

Inflation and interest rates dominate headlines, but another force is gnawing at the U.S. economy. Tariffs and trade restrictions are quietly freezing the construction sector. Construction is more than buildings and bridges. It’s one of the most labor-intensive parts of the economy, employing millions of workers across trades.

When projects stall because steel or parts cost more, it has ripple effects. Jobs freeze, small businesses delay expansion, and uncertainty spreads. Policy designed to protect industries is quietly suffocating the very job engine the economy relies on. It’s not yet obvious in the data, but markets often turn before the numbers catch up.

All the Lights Are Green, Yet the Engine Is Cracking

By traditional measures, the economy should be roaring. Capital is still relatively cheap compared to historical levels, energy prices are contained, and deficits are large enough to stimulate demand. Almost every light on the dashboard is green.

Yet the engine might be sputtering: Productivity growth is weak, small businesses report stress, and many households feel squeezed. Louis Gave argues that the old models are broken because they assume policy follows logic. Today, policy follows politics, and markets, trained to expect one kind of response, may find themselves in a different game altogether.

The AI Boom and the Risk of a Historic Bust

The last two years have added roughly $6 trillion in market value to companies tied to artificial intelligence and cryptocurrency. Nvidia, the emblem of AI’s promise, became one of the most valuable companies in history. Investors piled in with the confidence of people who believe this technology will reshape the world.

It may. However, if reality lags behind the narrative, history offers a guide. The dot-com bubble was not wrong about the internet. It was wrong about timing and profitability. If AI disappoints on either front, the correction will not just dent a few companies. It could erase years of gains and echo the pain of 2008, this time focused on the most hyped sector of our era.

The Dollar’s Last Safety Net

April 2025 produced a shock that went largely unnoticed. U.S. stocks, bonds, and the dollar all declined simultaneously. For decades, investors relied on the idea that when one struggled, the others would provide cover. That correlation shattered.

Louis Gave says this is what an emerging market crisis looks like. In emerging markets, when investors lose confidence, everything tends to sell off together. The world has just witnessed this dynamic in the U.S., the issuer of the world's reserve currency. If the safety net of diversification fails, investors must rethink not only portfolios, but assumptions about stability itself.

China’s Strategic Reordering of Power

It’s easy for the West to describe China as slowing: Growth rates are lower than in past decades, and domestic property markets remain fragile. Yet beneath the headlines, China is pursuing a deliberate strategy.

It’s exporting aggressively to the emerging world. It’s providing cars, batteries, and infrastructure at prices competitors struggle to match. It’s financing much of this through Hong Kong, reducing reliance on the U.S. dollar. The narrative of a weak China misses the point. China is redefining the map of global power and creating new dependencies across Asia, Africa, and Latin America. The long-term investment consequences of that shift are just beginning.

The Next Spark for Inflation

Energy prices today look tame. Oil trades within a comfortable range. Gasoline is not spiking at the pump. Investors have relaxed.

But the underlying picture is fragile. A decade of underinvestment in supply has resulted in tight production capacity. Meanwhile, demand from the global south is rising as billions of people improve their living standards. If oil surges because demand outpaces supply, inflation will not just return. It could come back with force, testing central banks and portfolios alike.

Emerging Markets Return to the Stage

Amid capital scarcity, not all regions are equal. Countries with credible fiscal policy, demographic strength, and improving productivity can attract capital and grow. Those without will struggle.

Louis Gave sees emerging markets as the overlooked winners. India and Mexico stand out. Both benefit from younger populations, favorable geography, and supply chains that are shifting away from China. For decades, investors treated developed markets as the safe core and emerging markets as the risky satellite. That assumption may invert. The trade of the decade could be in places investors have long underweighted.

What This Means for Portfolios

The list of shocks is not just a collection of scary headlines. Each one is a symptom of a deeper shift: from a world of abundant capital to a world where capital is scarce and governments must compete for it.

In that environment, portfolios built for the last forty years are misaligned. Bonds are no longer a one-way bet. Real assets tied to scarcity, like commodities and infrastructure, take on new appeal. Equities that rely on leverage may falter, while those with strong balance sheets and self-funding ability stand out. Diversification can no longer assume that developed markets all share the same risk profile. Emerging markets may offer not just growth, but resilience.

The Need to Think Differently

The hardest part of investing in a new regime is not the math. It is the mindset. For decades, investors were trained to believe that the Fed would save them. Rate cuts were the Pavlovian response to weakness. That habit is deeply ingrained.

However, if fiscal dominance means central banks are constrained, waiting for the old playbook is costly. Like a family that has always refinanced its mortgage at three percent, it is tempting to assume relief will come. If the renewal notice arrives at six percent and stays there, the habit itself becomes the risk.

Howard Marks has written that the biggest risks are often the ones investors dismiss because they feel unfamiliar. Morgan Housel reminds us that behavior, not analysis, often drives results. Put those together, and the lesson is clear: the unfamiliarity of fiscal dominance is exactly why it is dangerous.

The last era’s core truth was that interest rates would fall. The core truth of this era may be that capital is scarce, and governments compete for it just like companies do. Recognizing that shift is not about fear. It is about adaptation.

For investors willing to see the change, the next generation of returns will not come from clinging to the past, but from embracing the discipline of scarcity.

This is based on an episode of Top Traders Unplugged, a bi-weekly podcast with the most interesting and experienced investors, economists, traders and thought leaders in the world. Sign up for our Newsletter or subscribe on your preferred podcast platform so that you don't miss out on future episodes.

30/08/2025 by Naomi

“Fragile Floor, Outliers Fade”

This Week in Trend – 29 August 2025

Welcome back to This Week in Trend, your weekly pulse check on global futures and the state of systematic trend following.

The TTU Trend Barometer eased to 30 percent, down from last week’s 32, leaving conditions firmly in “very weak” territory. Breadth remains thin. A few markets delivered strong moves—natural gas, hogs, and precious metals—but broader participation faded. Crypto, softs, and equities weighed heavily, reminding us that dispersion cuts both ways.

SG Trend Index Performance

Month-to-date (as of Aug 29): +2.89%
Year-to-date: -7.43%
(Previous week: +1.74% MTD | -8.46% YTD)

August closed in positive territory, lifted by energy, metals, and livestock trends. Still, the YTD drawdown remains steep, reflecting how isolated outliers cannot offset weakness across the broader complex.

TTU Trend Barometer

Current reading: 30 percent – Very Weak
Previous reading: 32 percent
10-day rate of change: Rising weakly

At just 30 percent, fewer than a third of markets show medium-to-strong trend strength. The floor is fragile.

“At thirty, the floor is fragile—and the roar of outliers has faded into scattered whispers.”

The Top Traders Unplugged (TTU) Trend Barometer is a proprietary tool that measures the percentage of markets with medium to strong trends. Similar to a thermometer, where 0 degrees Celsius equates to freezing, a TTU Trend Barometer reading below 40% indicates a “cold” environment for trend-following, while readings above 55% signal a “hotter,” more favourable trend environment.

Weekly Asset Class Snapshot

Source: Finwiz.com

Asset Class Breakdown – Reversals and Continuations

Meats: +1.91% – Cattle and hogs extended clean upward trends.
Metals: +1.20% – Silver and gold surged; copper steadied.
Bonds: +0.07% – Flat to positive, steady diversification.
Currencies: +0.16% – Majors quiet, USD rangebound.
Volatility Index: +0.31% – VIX edged higher, reversing last week’s crush.
Grains: -0.57% – Corn, wheat, and oats gained, soybeans mixed, canola weak.
Energy: -0.66% – Nat gas rallied, but crude products dragged.
Soft Commodities: -1.37% – Cocoa, cotton, lumber, and sugar fell; coffee gained modestly.
Equities: -0.99% – US indices softened, with Nasdaq and Nikkei hardest hit.
Crypto: -7.91% – Bitcoin collapse drove the week’s biggest losses.

Performance Highlights – This Week’s Market Leaders & Laggards

Top Market Movers

Top Gainers

Natural Gas: +7.71% – Explosive rebound from deep lows.
Lean Hogs: +4.17% – Meats complex extended gains.
Rough Rice: +3.25% – Bounced sharply after prior week’s collapse.
Silver: +3.03% – Precious metals strength broadened.
Gold: +2.86% – Another week of steady buying.

Top Losers

Ethanol: -10.14% – Steep collapse capped the energy complex.
Bitcoin: -7.91% – Heavy downside break in crypto.
Lumber: -6.66% – Continued structural weakness.
Soybean Oil: -5.97% – Oils complex under pressure.
Canola: -5.85% – Agricultural weakness widened.

Portfolio View – Positioning and Impact

Energy: Nat gas longs dominated, crude steady, but products and ethanol dragged.
Metals: Gold and silver strong; palladium lagged.
Grains: Corn and wheat gains offset soy oils weakness.
Softs: Coffee firmed, but cocoa, lumber, cotton, and sugar dragged.
Meats: Long cattle and hogs remain portfolio leaders.
Bonds: Provided modest, stable diversification.
Equities: Global indices softened, led by Nasdaq (-1.3%) and Nikkei (-1.9%).
Currencies: Quiet week, no conviction shifts.
Crypto: Bitcoin losses offset commodity strength.
Volatility: VIX ticked higher, easing pressure on breakouts.

Final Reflections – Fragile Floor, Outliers Fade

This week was a quieter study in fragility. Last week’s roar of coffee and cattle gave way to muted outliers. Natural gas and metals offered strength, but crypto, softs, and equities dragged portfolios back. With the TTU Barometer at 30 percent, breadth remains absent.

For trend followers, the lesson is timeless: robust portfolios cannot rely on breadth in weak environments—they survive by catching the rare outliers that persist, even when the floor beneath remains fragile.

List of Resources used in the Week in Review

Important Disclaimers

This document is directly solely to Accredited Investors, Qualified Eligible Participants, Qualified Clients and Qualified Purchasers. No investment decision should be made until prospective investors have read the detailed information in the fund offering documents of any manager mentioned in this document. This document is furnished on a confidential basis only for the use of the recipient and only for discussion purposes and is subject to amendment This document is neither advice nor a recommendation to enter into any transaction. This document is not an offer to buy or sell, nor a solicitation of an offer to buy or sell, any security or other financial instrument. This presentation is based on information obtained from sources that TopTradersUnplugged (“TTU”) (“considers to be reliable however, TTU makes no representation as to, and accepts no responsibility or liability for, the accuracy or completeness of the information. TTU has not independently verified third party manager or benchmark information, does not represent it as accurate, true or complete, makes no warranty, express or implied regarding it and shall not be liable for any losses, damages, costs or expenses relating to its adequacy, accuracy, truth, completeness or use.

All projections, valuations, and statistical analyses are provided to assist the recipient in the evaluation of the matters described herein. Such projections, valuations and analyses may be based on subjective assessments and assumptions and may use one among many alternative methodologies that produce different results accordingly, such projections, valuations and statistical analyses should not be viewed as facts and should not be relied upon as an accurate prediction of future events. There is no guarantee that any targeted performance will be achieved Commodity trading involves substantial risk of loss and may not be suitable for everyone

TTU is not and does not purport to be an advisor as to legal, taxation, accounting, financial or regulatory matters in any jurisdiction. The recipient should independently evaluate and judge the matters referred to herein. TTU does not provide advice or recommendations regarding an investor’s decision to allocate to funds or accounts managed by any manager (“or to maintain or sell investments in funds or accounts managed by any manager, and no fiduciary relationship under ERISA is created by the investor investing in funds or accounts managed by any manager, or through any communication between TTU and the investor

In reviewing this document, it should be understood that the past performance results of any asset class, or any investment or trading program set forth herein, are not necessarily indicative of any future results that may be achieved in connection with any transaction. Any persons subscribing for an investment must be able to bear the risks involved and must meet the suitability requirements relating to such investment. Some or all alternative investment programs discussed herein may not be suitable for certain investors This document is directed only to persons having professional experience in matters relating to investments. Any investment or investment activity to which this document relates is available only to such investment professionals. Persons who do not have professional experience in matters relating to investments should not rely upon this document.

This document and its contents are proprietary information of TTU and may not be reproduced or otherwise disseminated in whole or in part without TTU’s prior written consent.

This document contains simulated or hypothetical performance results that have certain inherent limitations AND SHOULD BE VIEWED FOR ILLUSTRATIVE PURPOSES. Unlike the results shown in an actual performance record, these results do not represent actual trading. HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR INVESTMENT ACCOUNT.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM OR OTHER ASSET.

There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results. No representation is being made that any investment will or is likely to achieve profits or losses similar to those being shown.

26/08/2025 by Niels

July 2025: Policy Whiplash and Narrow Opportunity

July reminded trend followers how fast policy shocks can unwind weeks of patient positioning. The copper saga told the story: an initial tariff-driven surge, then a reversal when raw materials were excluded, and finally a 20 percent intraday collapse on 30 July that rippled across metals. Palladium, platinum, silver, and gold all reversed, equity momentum held up, and dispersion widened across managers. Risk controls did their job, yet many early-month gains were clipped late in the month.

Across the indexes, July was flat to negative for managed futures while equities advanced. We detail each index later, but the headline reads as follows:

TTU TF Index: −0.36 percent for July (YTD −10.53 percent, trailing 12 months −14.88 percent). Long-term profile remains intact, CAGR 7.02 percent with a 20.81 percent max drawdown.
SG Trend Index: −0.04 percent for July (YTD −10.03 percent, trailing 12 months −12.99 percent). Long-term CAGR 4.88 percent, max drawdown 20.61 percent.
BTOP50 Index: −0.76 percent for July (YTD −3.98 percent, trailing 12 months −4.01 percent). Long-term CAGR 3.87 percent, max drawdown 15.94 percent.
S&P 500 Total Return: +2.24 percent for July (trailing 12 months +16.34 percent). Since 2000, CAGR 7.77 percent with a 50.95 percent max drawdown.

In short, July delivered policy whiplash, sharp cross-metal reversals, and higher dispersion among programs. Equities remained firm, while most trend composites treaded water or slipped slightly. The backdrop stays fragile, with opportunity concentrated rather than broad.

July 2025 Trend Index Performance

Persistent reversals across metals and heightened dispersion in equities left most trend indexes struggling to advance in July. Gains in the first half of the month were largely erased by the end-of-month copper shock, leaving the broad ensemble of systematic programs flat to negative. Despite this setback, long-term resilience remains evident, particularly in the TTU TF Index, which continues to outpace its peers in compound growth over the full data period.

SG Trend Index

The SG Trend Index is designed to track the 10 largest trend following CTA’s of the managed futures space.

Criteria for inclusion in the Index as determined by Society Generale is as follows:
• Must trade primarily futures (including FX forwards);
• Must be broadly diversified across asset classes;
• Must be an industry recognized trend follower;
• Must exhibit significant correlation to trend following peers;
• Must be open the new investment; and
• Must report returns on a daily basis (net of fees).

The index currently is:
• Equally weighted;
• Calculated in base currency;
• Has an inception date of 1st January 2000;
• Rebalanced annually on 1st January; and
• Reconstituted annually on 1st January based on eligibility criteria.

There was a slight modification to the Index from January 2013 to the present. Previously the Programs needed to be a constituent of the SG CTA Index and the 10 largest Managers was not a requirement.

For the 2025 year following the rebalance of the Index we say goodbye to the PIMCO LLC (Pimco Trends Managed Futures) Program and hello again to the Winton Capital Management (Winton Trend) Program. The listing of the 10 eligible programs in the Index for 2025 is as follows:

Table 1 – SG CTA Index 2025 Constituents

The SG Trend Index, which tracks the 10 largest institutional CTAs, slipped −0.04 percent in July. The index remains down −10.03 percent YTD and −12.99 percent over the trailing 12 months. Its maximum drawdown sits at 20.61 percent, a reminder of the depth of the current environment.

Since inception in 2000, the SG Trend Index has delivered a CAGR of 4.88 percent, placing it between the higher-performing TTU TF Index and the more diluted BTOP50 Index. Its high correlation (0.95) to the TTU TF Index reinforces its role as a bellwether for large institutional trend-followers, though its stricter focus on AUM has historically led to lower long-term returns.

The performance of the SG Trend Index since 1st January 2000 to the end of last month is seen in Chart 2 below:

You will notice how the SG Trend Index is highly correlated with the BTOP50 Index and the TTU TF Index and uncorrelated with the S&P500TR Index.

Despite the high correlation between the various trend following Indexes, the long-term performance of these three Trend Following Indexes in terms of CAGR is different. The SG Trend Index plots between the BTOP50 Index and the TTU TF Index.

BTOP 50 Index

The BTOP50 Index seeks to replicate the overall composition of the managed futures industry with regards to trading style and overall market exposure. Unlike the SG Trend Index and the TTU TF Index, the BTOP50 is not strictly a trend following Index and is more broadly representative of the entire managed futures segment of which a dominant style is trend following. We like to think of the BTOP 50 as a ‘quasi trend following Index’ as opposed to a pure trend following Index.

Like the SG Trend Index, the BTOP50 Index is designed to track the performance of the largest Programs by AUM, however the Programs included may not be all Trend Following Programs.

Criteria for inclusion in the Index as determined by BarclayHedge is as follows:
• Must be a Program represented in the Barclay CTA Universe;
• In each Calendar year, the Programs selected must in aggregate be no less than 50% of the investable assets of the Barclay CTA Universe;
• The Programs must be open for investment;
• The Manager must be willing to provide Barclay Hedge with daily return performance;
• The Program must have at least two years of trading activity; and
• The Program’s advisor must have at least three years of operating history.

The index currently is:
• Equally weighted;
• Rebalanced annually on 1st January; and
• Reconstituted annually on 1st January based on eligibility criteria.

Despite the ’50’ tag in the BTOP 50 description, for 2025 there are 20 constituents in the Index.

The BTOP50 Index, a broader measure of managed futures programs, posted a −0.76 percent loss in July. This leaves the index down −3.98 percent YTD and −4.01 percent over the trailing 12 months. With a long-term CAGR of 3.87 percent and a maximum drawdown of 15.94 percent, the BTOP50 has historically offered smoother but more muted returns compared to pure trend composites.

The broader inclusion of non-trend strategies cushions short-term volatility but dilutes upside capture. As in June, this design feature explains why the BTOP50 has held up better on a YTD basis than pure trend peers, but at the cost of lower absolute performance over the full period.

The performance of the BTOP 50 Index since 1st January 2000 to to the end of last month is seen in Chart 4 below:

The BTOP 50 Index is highly correlated with the trend following Indexes of the SG Trend Index and the TTU TF Index, however its long-term performance is the lowest of the 3 Trend Following Indexes. While there is a significant representation of Trend Following Programs within the Index, the non-trend following Programs contribute to this diluted long-term performance.

TTU TF Index

The TTU TF Index has been developed by Top Traders Unplugged to provide a performance measure of the trend following programs with a long-term track record.

At TTU, we recognise the importance of a robust trading approach to these uncertain markets and feel that AUM is not a good robustness measure when it comes to assessing performance of the Trend Following industry. It is our strong opinion that the ultimate selection measure to apply in constituting a Trend Following Index is not AUM or a proxy risk metric such as the Sharpe, Sortino, MAR ratio, Ulcer Index or Serenity ratio. The superior metric to assess long-term performance is the long-term validated track record itself.

We have therefore developed a different method for constructing our TTU TF Index. The criteria for inclusion into our Index is as follows:

The criteria for inclusion into the TTU TF Index is as follows:
• Monthly performance results need to be captured in the Nilsson Hedge CTA database;
• Must be geographically diversified across asset classes;
• Must be fully systematic in nature using quantitative rules for entry and exit;
• Must possess at least a 15-year unbroken track record to the current reporting month;
• Must adopt trend following as their dominant investment strategy;
• Are currently active programs; and
• Must report performance monthly (net of fees).

The Index:
• Is Equally weighted;
• Is Rebalanced monthly;
• Is Reconstituted monthly;
• Has an inception date of 1st January 2000

As of July 31, 2025, the TTU Trend Following Index is composed of 49 active programs, each with a long-term verified track record. The monthly return is calculated as the average performance of all programs that have submitted results for the period. For July, 42 of the 49 programs reported performance data by the cut-off date.

Table 5: Programs highlighted in yellow in the Table above have not currently reported for the month.

The performance of the TTU TF Index since 1st January 2000 to to to the end of last month is as follows:

Now you might be intrigued by the performance result of the TTU TF Index. While it is highly correlated with the BTOP 50 Index and the SG Trend Index, we can see that long term performance of the TTU TF Index clearly outstrips alternative Index measures.

The dominant contributor of this outperformance is the requirement for any participating Program in the Index to have a long-term track record. You see, using AUM as a criterion for inclusion is not necessarily a useful selection criterion. While AUM reflects ‘market appeal’, it does not imply that this ‘market appeal’ is strongly correlated with ‘long term performance’.

Our process of Index construction gives us an insight into how any diversified ensemble of trend following Programs with a long-term track record approaches an optimal portfolio as we increase the number of Programs in the Index. Simply by diversifying into a large ensemble of Trend Following Programs with a long-term track record, we magically improve the Index result. CAGR is increased and our drawdowns are reduced.

Of course, we already know this ‘diversification’ principle of Trend Following. As we increase our diversification efforts, we obtain improvement both in terms of the maximum drawdown and in the CAGR generated by the ensemble. This is why we seek to strive for maximum market and system diversification within our individual programs. The TTU TF Index just takes this diversification one step further and diversifies across many different TF Programs to deliver a superior risk-adjusted result.

TTU TF Index Performance

The TTU TF Index, composed exclusively of long-tenured trend-following programs, declined −0.36 percent in July. YTD, the index is down −10.53 percent and −14.88 percent over the trailing 12 months. Despite current pressure, the TTU TF Index remains the strongest performer over the long run, with a CAGR of 7.02 percent since 2000 and a maximum drawdown of 20.81 percent.

Its methodology — selecting programs based on track record rather than AUM — continues to yield superior long-term results, even during extended drawdowns. The July dip underscores the fragility of current conditions but does not undermine the robust profile of the composite.

The TTU TF Index remains highly correlated with the SG Trend Index (0.95) and BTOP50 Index (0.93) but retains superior long-term performance due to its focus on long-tenured programs. This continued outperformance underscores the benefits of selecting managers based on durability and process integrity rather than AUM.

In sharp contrast to managed futures, the S&P500TR Index delivered another positive month in July, rising +2.24 percent. The index has now posted +16.34% over the last 12 months, continuing a powerful equity bull run.

Since 2000, the S&P500TR has outpaced other benchmarks in absolute terms with a 7.77% CAGR, but at the cost of a maximum drawdown of 50.95%. This highlights the importance of trend-following strategies as portfolio diversifiers, especially when equity risk premia compress (see chart below).

TTU Trend Barometer

The TTU Trend Barometer closed July at 36, signalling an unfavourable trending environment. This marks a sharp deterioration from June’s neutral reading of 50 and underscores how the month’s late-stage policy reversals disrupted trend structures.

The Barometer, which measures the strength of price persistence across 44 global futures markets, indicates that opportunity was narrow and dispersed. Short-term and medium-term signals diverged, with a handful of isolated opportunities failing to offset widespread reversals in metals and commodities.

As always, it is important to note that the Barometer reflects month-end conditions and may not fully capture intra-month fluctuations. July’s reading highlights just how quickly the environment can shift from neutral to challenging when abrupt policy shocks reshape market flows.

The Trend Barometer is a proprietary tool we use at TTU to assess the trend strength of a diversified portfolio consisting of 44 markets across all sectors. We firstly subdivide the trend strength of each market of a hypothetical diverse portfolio into five ranges from strong up, medium up, neutral, medium down and strong down. We then aggregate these results into a single portfolio number which we use to describe the overall trend strength across a hypothetical Program portfolio.

We then arbitrarily divide this percentage range into 3 where a value of 0-30 is considered a very unfavorable market regime for trend following Programs, a range between 30 to 55 is a somewhat neutral environment for Trend Following Programs (but not an environment where you could expect consistent performance) and values more than 55 are considered to be a favorable regime towards Trend Following Programs, where they should see good performance.

Aside from the occasional dispersed readings when compared to overall trend following performance this method is surprisingly powerful in describing CTA monthly performance and can be used to connect market trading environments to resultant Manager performance.

The Macro Environment

For a blow-by-blow macro wrap for the month, we recommend you listen to our weekly systematic investor series by clicking on the links below. It is also worthwhile listening to our past catalogue as it provides you with an understanding of how these markets can shape the emotions of a Trader and why it is therefore essential that Trend Followers adopt systematic rules-based processes to keep these emotions in check.

You can find all of our weekly conversations by clicking this link.

Top 10 Lists

We have prepared the following Top 10 lists (excluding non-reporting Programs) for various performance categories based on monthly performance returns for a 15-year period commencing 1st January 2010 to the current month.

Top 10 Listing – by Compound Annual Growth Rate

Chart 10– Top 10 Program Performance by Compound Annual Growth Rate

Top 10 Listing – by Risk Adjusted Return (Serenity Ratio)

Table 11: Top 10 based on Serenity Ratio

Chart 12 – Top 10 Program Performance by Serenity Ratio

Top 10 Listing – by Last 12 months Performance

Table 13: Top 10 based on Last 12 Months Performance

Chart 14 – Top 10 Program Performance by Last 12 Months Performance

Performance Results for the TTU Top 5 by Serenity Ratio

In a research project, we undertook at TTU, we examined three different allocation methods that could be deployed by an investor seeking to optimally allocate investment funds towards 5 of the Top ranked Globally Diversified Systematic Trend Following Programs with a long-term track record.

These three methods adopted 3 different forms of performance metric, namely:

Top 5 Performers by Compound Annual Growth Rate (CAGR) using a rolling lookback of 15 years.
Top 5 Performers by MAR ratio (CAGR/Max Draw%) using a rolling lookback of 15 years.
Top 5 Performers by Serenity Ratio using a rolling lookback of 15 years.

The findings of our project can be obtained by clicking on this link.

Our research determined that the optimal selection method was the Serenity Ratio method.

The Serenity Top 5 Selection Method fell −1.69% in July 2025, extending the YTD decline to −14.76% (refer to Chart 21). The composite remains under pressure from the same forces that weighed on broader trend indexes, with the end-of-month copper collapse amplifying volatility.

Following the annual reconstitution earlier this year, Mulvaney Capital’s Global Diversified Program joined the Serenity portfolio, adding greater variability to monthly returns due to its inherently aggressive profile. July’s outcome again reflects that dynamic. While Mulvaney boosts long-term convexity, it can sharpen short-term drawdowns.

The Serenity Ratio continues to prove its value as a robust filter for identifying managers with consistent, risk-adjusted performance. By prioritizing lower drawdowns and long-term durability, the metric highlights funds that weather a variety of market regimes. Yet, as July demonstrated, no single measure can fully insulate investors from real-world volatility or sudden policy-driven shocks.

Over the full reporting period, the Serenity portfolio has achieved a CAGR of 4.49% with a maximum drawdown of 26.82%, while maintaining a near-zero correlation to the S&P 500 Total Return Index (−0.05). This reinforces its role as a diversifier, even in periods of underperformance.

Chart 15 – Performance Results of the Top 5 Allocation Method (Serenity Ratio)

The 2025 Serenity selection is as follows and will be maintained for the investment period between 1st February 2025 to 31st January 2026:

Man AHL: AHL Evolution;
Man AHL: AHL Alpha;
Mulvaney Capital Management: Global Diversified Program.
Man AHL: AHL Dimension; and
Quantica Capital AG: Managed Futures Program.

Individual Performance Results for these 5 Programs used for the Serenity allocation to the reporting month using the 2025 listing are as follows:

Chart 16 – Performance Results MAN AHL: AHL Evolution

Chart 17 – Performance Results MAN AHL: AHL Alpha

Chart 18 – Performance Results Mulvaney Capital Management: Global Diversified Program

Chart 19 – Performance Results Man AHL: AHL Dimension

Chart 20 – Performance Results Quantica Capital AG: Managed Futures Program

Performance Results for the Alternative 60/40 portfolio using the TTU Top 5 by Serenity Ratio

In our “How to Invest with the Best” blog post, we also highlighted the significant improved risk-adjusted performance results that could be achieved by replacing the 40% allocation to Bonds in the traditional 60/40 portfolio with an allocation of 40% towards the TTU Top 5 by Serenity ratio.

The evaluation compared the performance of a traditional 60% Equity/40% Bond portfolio against a 60% Equity/40% Serenity portfolio to highlight the uncorrelated historical nature of this Alternative 60/40 portfolio and demonstrate the benefits that a sizeable allocation towards the Serenity portfolio would bring to an investor if equity and bond markets go back to their historic relationship and become more positively correlated in the future. There is no guarantee that correlations remain static over time and it is possible that bond markets and equity markets may lose their uncorrelated relationship that has existed in the last 20 years or so. It is far less likely that the TF managers within the Serenity Grouping will ever be strongly positively correlated to the Equities market, over the long run, given the extensive global diversification and ability to go long and short, that is present within the constituents of the Serenity Grouping.

Chart 21 below showcases the comparative performance results for the period 1 January 2000 to the end of last month:

A 100% investment in the S&P500TR portfolio;
A 100% investment in the VBMFX which is a proxy for the bond market;
A 100% investment in the VBIAX which is a suitable proxy for the classic 60% Equity/40% Bond portfolio;
A 100% investment in a 60% S&P500TR 40% Serenity portfolio; and
A 100% investment in the Serenity Portfolio.

Chart 21 – Comparative Performance Results of Various Portfolio Allocations

The comparison of alternative portfolio allocations above highlights the strong historic risk adjusted returns that have been enjoyed by 60% S&P500TR / 40% Serenity Composite Portfolio.

A more detailed assessment of this powerful 60/40 investment option is reflected below.

Chart 22 – Performance Results for the 60% S&P500TR/ 40% Serenity Composite

Important Disclaimers

This document and its contents are proprietary information of TTU and may not be reproduced or otherwise disseminated in whole or in part without TTU’s prior written consent.

23/08/2025 by Naomi

The VIX has long been seen as the market’s fear gauge, but in reality, it's a complex blend of positioning, speculation, and structural forces.
The Cboe’s new decomposition tool breaks it all down, helping traders see what’s really moving the market.
This framework equips market participants with insights that can sharpen their strategies and improve decision-making

Volatility has always been the market’s heartbeat. You can watch prices tick up and down all day, but the real pulse is hidden beneath the surface in how traders price risk. For decades, the VIX Index has been Wall Street’s go-to shorthand for that pulse. It’s usually called the “fear gauge,” a single number that supposedly captures how worried investors are about the future.

That nickname is catchy. It’s also incomplete.

The VIX is not merely a reflection of fear. It’s a blend of expectations, positioning, and hedging activity, all woven into the options market. Sometimes it moves higher because investors are scared of a sharp sell-off. Other times it climbs because traders are betting on a rally. Without a way to pull apart these influences, you are left with a blurry picture.

That is the problem Cboe’s new VIX decomposition tool aims to solve. By breaking the index into its core components, it offers traders and investors a much sharper view of what’s actually driving volatility.

Why the VIX Alone Can Be Misleading

On the surface, the VIX measures the market’s expectation of how much the S&P 500 will move over the next 30 days. The higher the number, the bigger the anticipated swings. Simple enough.

BUT… that number is an average of many moving parts. It blends together downside protection demand, upside speculation, and the natural mathematical effects of how options are priced. Without separating those factors, a spike in the VIX could be interpreted as panic when it’s actually something else entirely.

Consider a day when the S&P 500 jumps sharply. Common sense might tell you the VIX should fall because investors feel less fearful. Yet the opposite can happen if traders are scrambling to buy Call options to chase the rally. In that case, the VIX is rising because of demand for upside exposure, not because anyone is bracing for disaster.

This is why serious volatility traders have long wanted a way to break the index into its underlying drivers.

Breaking the VIX Into Pieces

The decomposition framework takes the VIX and dissects it into distinct building blocks:

Expected move: How much of the change in the VIX comes simply from the S&P moving up or down along the existing volatility surface.
Parallel shift: A broad repricing of options across strikes, often after a shock when traders raise premiums for both Puts and Calls.
Skew: Differences in pricing between out-of-the-money Puts and Calls, which can reveal whether traders are leaning bearish or bullish.
Convexity: Pricing changes in deep out-of-the-money options, which often show demand for protection against extreme moves.

With these pieces, you can answer questions like: Is the VIX rising because people want downside hedges? Because they are buying upside? Or because option sellers are lifting premiums across the board after a shock? The answers can change how you trade, hedge, or even interpret the broader market mood.

Positioning Matters More Than You Think

Markets are not only about fundamentals. They are about positioning. Who owns what, who is short, and who is desperate to get out of a trade can all drive prices in ways that have little to do with economic data or corporate earnings.

The VIX decomposition tool can expose these positioning dynamics. For example, in some sell-offs, the VIX barely budges because traders were already heavily hedged. When bad news hits, there is no rush to buy protection, so volatility stays muted. In other cases, an unexpected shock forces investors to scramble for options, sending the VIX soaring even if the underlying decline is modest.

This is where volatility becomes reflexive. Large shifts in option positioning can push the S&P itself higher or lower as dealers hedge their books. If dealers are short Calls, they may have to buy stocks as prices rise, fueling the rally. If they are short Puts, they may have to sell as prices drop, accelerating the decline. Watching the volatility surface is one of the most effective ways to detect these forces.

Lessons From History

History offers plenty of examples where understanding volatility’s drivers mattered more than the headline number.

Take the 2015 yuan devaluation. The surprise move by China triggered a sharp but short-lived spike in volatility. Option demand surged across the board because the event was unexpected, catching traders off guard.

Then there was “Volmageddon,” the February 2018 spike in volatility that wiped out short volatility strategies. Volatility-linked products magnified losses and forced massive covering of short volatility positions. The VIX spiked on positioning, not on a deep market decline.

More recently was the 2022 bear market. Despite a ~27 percent peak-to-trough drop in the S&P 500, the VIX stayed relatively calm because investors had already positioned themselves for bad news. And, in several cases since then, the VIX has risen during strong equity rallies because traders piled into calls, driving up option premiums.

In each case, a decomposition would have shown whether the driver was downside fear, upside speculation, or a mechanical shift in the volatility surface.

The Zero-DTE Factor

One of the biggest changes in recent years is the explosive growth of zero-day-to-expiration (0DTE) options. These contracts, which expire the same day they are traded, now account for roughly 60 percent of SPX option volume.

0DTE options are cheap, flexible, and popular with a wide range of traders. Some use them for short-term directional bets. Others sell them systematically to generate income. Because they settle so quickly, they can simplify certain volatility plays and allow traders to express very specific views about where the market will close today.

Far from being just a speculative tool, 0DTE options can help market makers manage risk and provide liquidity in longer-dated contracts. Their growth adds another layer to understanding volatility, since large flows in same-day options can ripple through the broader options market.

Why This Matters for Traders and Investors

For a long time, volatility analysis was about reading one number and making a judgment call. The VIX was high, so fear must be elevated. The VIX was low, so complacency must be setting in.

That kind of binary thinking is not enough anymore. With the ability to break the VIX into its components, you can tailor your strategy to the actual forces at work.

If the spike is coming from downside put demand, hedges might be expensive, and you might look for alternatives. If it’s driven by upside call buying, that could be a sign of speculative froth or a potential short squeeze. If the entire volatility surface is lifting after a shock, you might expect elevated premiums to persist for a while.

The right interpretation can mean the difference between putting on a winning hedge and wasting money on protection you did not need.

Looking Ahead

The Cboe plans to make the VIX decomposition tool available for regular use, along with historical snapshots of past volatility events. Having real-time and historical context will allow traders to see patterns and anticipate how the market might react under similar conditions.

For those who trade volatility directly, the benefits are obvious. For long-term investors, the insights are still valuable. Knowing whether volatility is being driven by structural positioning, macroeconomic shocks, or speculative activity can help you decide when to stay the course and when to prepare for turbulence.

Final Thought

Howard Marks often writes about the importance of “second-level thinking” in investing. Morgan Housel reminds us that markets are driven by people’s behavior as much as by fundamentals. The VIX decomposition tool is a way to bring that second-level thinking into volatility analysis. It moves you beyond the headline number and into the deeper forces shaping market risk.

Volatility will always be part of the market’s heartbeat. Now there is a better way to listen.

23/08/2025 by Naomi

“Fragile Floor, Outliers Roar”

This Week in Trend – 22 August 2025

Welcome back to This Week in Trend, your weekly pulse check on global futures and the state of systematic trend following.

The TTU Trend Barometer ticked slightly higher to 32 percent, still firmly in “weak” territory. Beneath the fragile surface, however, a handful of markets roared — coffee, cattle, crude oil, and small caps each delivered outsized trends. Bonds and precious metals provided steady ballast, while natural gas, rice, and cocoa collapsed. This was not a week of broad participation, but one where outliers again wrote the story.

SG Trend Index Performance

Month-to-date (as of Aug 22): +1.74%
Year-to-date: -8.46%
(Previous week: +1.81% MTD | -8.39% YTD)

The SG Trend Index dipped slightly versus last week’s pace but stayed positive for August. The YTD drag remains heavy, yet strong softs, cattle, and US equities are lifting returns at the margin.

TTU Trend Barometer

Current reading: 32 percent – Moderately Weak
Previous reading: 27 percent
10-day rate of change: Rising weakly

At just 32 percent, fewer than a third of markets show medium-to-strong trend strength. The backdrop is fragile. Yet, the week proved that even from weak foundations, runaway outliers can still dominate portfolios.

“At thirty two, the floor may be fragile — but the roar of outliers shakes the market.”