Market Trends for September 2017

Hurricanes, The Fed & North Korea created plenty of headwind in September
With 8 out of 9 monthly observations at or below 45, the Trend Barometer has been a perfect gage of the difficult environment that trend following strategies have faced this year. And September was no exception. This is one of those rare prolonged periods where the men are sorted from the boys when it comes to holding on to this kind of strategy. But what is really interesting when you take a moment and look a little bit deeper, the apparent calm expressed by the Index of Fear (VIX) only tells part of the story. In fact the "fear of fear" as you further out the curve is increasing, which may explain why we see continued new inflow into both short-term and longer-term trend following strategies. A positive sign in my opinion, where smart investors make sure to be well positioned with non-correlated strategies BEFORE the need it, instead of "after the event" which has normally been the case. As Ray Dalio explains in his new book "Principles" that came out in September...if you combine a number of un-correlated strategies you are able to reduce the overall portfolio risk by as much as 80% WITHOUT giving up any of the upside! This is how he has built his "legacy portfolio" based on sound principles, which are not new by any stretch of the imagination, but are now becoming accepted and acted upon by a much wider group of institutional and high net worth investors. Hopefully this is a TREND that will continue to build strength!Next, let’s look at where the trend Barometer finished the month;

The number of markets recorded in a trending state decreased from 15 to 12 during the month. Strongest trends were recorded in energy markets, such as GasOil, HeatingOil and Brent and in a couple of the Short-Term interest rates markets like Short Sterling and EuroDollar. Base metals was represented by Lead and Zinc and Precious metals by Palladium and Platinum. As usual we saw a few equity markets on the list of markets in a trending state.

With GasOil, HeatingOil and Brent on the list of trending markets...it comes as no surprise that the Energy sector was the only sector showing some sign of life.
For those who are relatively new to trend following, it is important to note that historically, Q4 has tended to be the strongest quarter of the year.Will this be the case in 2017 as well? The truth is, I don't know...but what I do know is that we often see the strongest trends following the most difficult periods. Remember back in 2013, when many commentators had pronounced the Death of Trend Following after a excruciatingly difficult summer period...after which trend followers came roaring back the following year!
All I'm saying, as long as you are invested with a manager that is managing this difficult spell well...then you should be in good hands for when the trends re-emerge.

If history is any guide, then one could argue that we are getting close to seeing this unusually weak period for the TB coming to and end, and those investors who have withstood the temptation of putting everything in equities...will be the ones collecting the chips as investors head for the Exit!

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
I hope you found the information useful as part of your own evaluation of the trend following part of your investment portfolio. I will continue to 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. P.S. if you want to follow the Trend Barometer on a daily basis, please click here and if you want to see the list of Market Symbols explanations, please click here.Most Comprehensive Guide to the Best Investment Books of All Time

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