Talking Trends

The only thing Wooden cared about was focusing on things within his control and doing them to the best of his ability. He didn’t care or worry about things outside of his control, including winning. He actually believed winning was outside of his control. Remember, this is a guy who’s won more national titles than anyone.

https://medium.com/@mmelissinos/john-wooden-and-focusing-only-on-results-9eb3c2971bec

Every investment strategy experiences winning and losing streaks. They all take turns at the front and back of the line. Trend following has been sitting near the back of the line for the past 5-10 years, while stocks sit near the front.

Trend following performance derives from the aggregate trends of all the markets within the portfolio, not just one or two markets or sectors. Over the past few years, performance struggles as choppiness from other major asset classes weigh down positive performance from stocks.

https://medium.com/@mmelissinos/trends-have-trends-663ce5e8379f

Every investment strategy experiences winning and losing streaks. They all take turns at the front and back of the line. Trend following has been sitting near the back of the line for the past 5-10 years, while stocks sit near the front.

Trend following performance derives from the aggregate trends of all the markets within the portfolio, not just one or two markets or sectors. Over the past few years, performance struggles as choppiness from other major asset classes weigh down positive performance from stocks.

This, while annoying, can happen from time to time. The next 5-10 years may not look like the past 5-10 years. Maybe stocks chop around for a while and commodities trend well. Maybe stocks and bonds both decline while commodities and currencies rise. Who knows. 

https://medium.com/@mmelissinos/trends-have-trends-663ce5e8379f

For the past 5–10 years, trend followers have had to deal with a double-whammy — poor markets and no interest on excess cash. However, it appears at least one of those is changing for the better.

Interest rates are rising.

Today, the 3-month T-Bill yields ~1.75%. Even though this is pretty low on a historic basis, this is a welcoming sign given it sat near zero percent from 2009–2016.

https://medium.com/@mmelissinos/a-trend-followers-secret-weapon-makes-a-comeback-fc3e064c3c29

For the past 5–10 years, trend followers have had to deal with a double-whammy — poor markets and no interest on excess cash. However, it appears at least one of those is changing for the better.

Interest rates are rising.

Today, the 3-month T-Bill yields ~1.75%. Even though this is pretty low on a historic basis, this is a welcoming sign given it sat near zero percent from 2009–2016.

https://medium.com/@mmelissinos/a-trend-followers-secret-weapon-makes-a-comeback-fc3e064c3c29

The following factors make me bullish on commodities:

1) Multi-year congestion

2) Low volatility

3) A rolling Sharpe Ratio near historic lows and most importantly...

4) New price breakouts.

https://medium.com/@mmelissinos/opportunity-in-commodities-d0281fca3ece

The following factors make me bullish on commodities:

1) Multi-year congestion

2) Low volatility

3) A rolling Sharpe Ratio near historic lows and most importantly...

4) New price breakouts.

https://medium.com/@mmelissinos/opportunity-in-commodities-d0281fca3ece

I believe the bond market presents the most intriguing opportunity for trend followers right now.

We’ve gone through an unprecedented time of low interest rates since 2008 and now that trend appears to be reversing. This trend may have more fuel than others given the extremely low volatility and overall feeling of complacency.

Long-only bond funds, especially ones that use volatility to size their risk, have built up massive positions so any uptick in volatility or reversal of trend might trigger a mass exodus — kind of like what we saw in stocks and volatility-related instruments a couple of weeks ago.

https://medium.com/@mmelissinos/a-storms-a-brewin-in-u-s-government-bonds-93dd50f338fd

I believe the bond market presents the most intriguing opportunity for trend followers right now.

We’ve gone through an unprecedented time of low interest rates since 2008 and now that trend appears to be reversing. This trend may have more fuel than others given the extremely low volatility and overall feeling of complacency.

Long-only bond funds, especially ones that use volatility to size their risk, have built up massive positions so any uptick in volatility or reversal of trend might trigger a mass exodus — kind of like what we saw in stocks and volatility-related instruments a couple of weeks ago.

https://medium.com/@mmelissinos/a-storms-a-brewin-in-u-s-government-bonds-93dd50f338fd