Managed futures trend-following, 60/40 stock/bond allocation and crisis gains

Managed futures trend-following has been a hated strategy for many investors. Weak performance with the maligned attempt at marketing jargon, crisis alpha, made for tough days for these managers. Nothing with trend-following strategies have changed, but the markets are different and that matters a lot. 

The post Financial Crisis was characterized by increasing equity prices, falling yields, and no inflation. It was a perfect environment for holding a 60/40 stock bond mix. There were no extended equity declines so long/short trading was whipsawed. The negative correlation between stocks and bonds smoothed returns but the falling trend in yields supported the hedge.

Now, we are in a different environment. An almost bear market in equities over a period of less than 2 weeks and an ultra-strong rally in bonds. Trends are now offering advantage. Using an 80-day moving average for a long-term trend with SPY and IEF as the equity and bond choices (the same results would occur with 20 or 40-day), March would be a great month for trend-followers. Any variation on trend would effective. Even if holding a more diversified portfolio the result would be the same. 

Crisis protection from following trends has been supportive for investors. Down trends that extend over time because risk is revealed slowly is positive for trend-followers. Whether this continues is not critical. The trend exposure provided protection and bought investors time to make strategic allocation changes.