Trend Following in a Time of Crisis
Trend Following investing has attracted a lot of attention over the past decade due to its strong performance during the DOTCOM Bubble and Global Financial Crisis as well as the academic research findings showing its persistence across long periods of time and economic environments, applicability (across sectors, countries and asset classes), robustness through "never seen before" events and ease of implementation (low costs and highly liquid).
Today, investors take a balanced portfolio approach (the "60/40" portfolio) to investing and feel safe owning stocks because their bonds in the past three decades have acted like a hedge. Whenever stocks have fallen, bonds have gone up. In every downturn since the 1980s, central banks have cut rates, but most government bonds now have close to zero yields.
Extremely low interest rates and high valuations mean that any small change in interest rates will make portfolios much more volatile. If interest rates were to rise even slightly, they would vaporise many bond and stock portfolios. The margin of safety in bonds and stocks has diminished rapidly as rates have approached zero.
The world is now upside down. Many investors now buy stocks for current income and buy bonds to trade given how volatile they have become. Things cannot hold.
In this video, you will learn:
- How a Trend Following strategy, using actual data, has navigated the last four major crisis, since Black Monday in October 1987
- Why the secret to success in Trend Following is not just about where you Buy and Sell
- The amazing effect that a Trend Following strategy can have on your portfolio of Stocks and Bonds
- And why Trend Following as a strategy fits the definition of Ray Dalio's Holy Grail in investing
If you want to learn more about the specific strategy used in this presentation, please visit DUNN Capital's website.