January kicked off 2016 on a positive note!
Although the Trend Barometer finished unchanged for the month, it did spend the first half of the month significantly above break-even, which allowed trend following strategies to build up enough of a cushion to withstand the drop in number of trends during the last week of January in particular.
Firstly, let’s look at where the trend Barometer finished the month;
The next chart below shows a snapshot of a 44-market portfolio with markets listed in “groups” of market sectors; As you can see, we had a few markets showing a strong trend score (mainly fixed income) and I suspect that a classic diversified trend following portfolio, will show most of the gains coming from the bonds and short-term interest rates but energies, currencies should also have contributed positively depending on how well the systems handled the recent bounce in energy prices as well as Bank of Japan’s latest policy move.
In the chart below, I have grouped the markets into 10 sectors. 8 out of 10 Sectors finish the month in a trend Neutral;
The last chart shows the evolution in the Trend Barometer since January 2015. It’s fair to say that the roller-coaster environment that trend followers experienced in 2015 has continued into the new year, but the key take-away from January is really the STRONG performance of trend followers during the weeks of severe drop in global equities, which really is one of the main reasons many investors have started again to embrace trend following CTAs as part of a well-balanced multi-asset portfolio. In other words…the non-correlation story continues to work!
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
I hope you found the information useful for the way you evaluate the trend following part of your investment universe. Unless you tell me otherwise, I will do my best to keep you up-to-date with regards to the environment for diversified trend following strategies and would love to discuss any of this information with you. Just reach out to me.