March 2, 2025. The market opens to a sea of red following news of a U.S. attack on the Iranian regime. Treasuries bleed in anticipation of inflationary supply shocks. Trend-following strategies are in disarray. Tail strategies have not yet reacted. And yet, carry, of all factors, soars.
What’s most interesting is that this strategy is not well known for its convex properties. In fact, carry is mor...
The strongest version of this narrative is that carry’s outperformance during the Iran conflict underscores the value of structural diversification in portfolios. The article credibly argues that carry, a mean-reversion strategy, benefited not from predictive power but from its inherent exposure to asset classes that thrived in an inflationary shock—namely, energy and the U.S. dollar. This aligns with the broader thesis that traditional 60/40 portfolios are vulnerable to inflation risks and geop...