On April 2, 2025, one of the largest market shocks since 2020 hits financial markets. Out of left field, President Trump announces punitive tariffs left and right, and most financial assets begin bleeding. In the desperation, investors look for a safe haven. Ironically, trend following—long considered a source of crisis alpha—experiences one of its worst drawdowns in history.1 Whoomp, whoomp. The ...
The narrative presents trend-following as a counterintuitive but valuable strategy, particularly in volatile markets. The strongest version of this argument acknowledges its historical resilience after drawdowns and its diversification benefits, especially when equities underperform. However, the analysis also concedes that trend-following is not a panacea—it struggles during rapid equity crashes and its performance is highly dependent on the nature of market shocks.
Patterns detected: none. The...