Current market environment performance of dynamic, risk-managed investment solutions.
By Will Hubbard
I’ve heard that phrase more than once this year. In my experience, whenever someone declares a long-standing investment approach finished, it’s usually just a matter of time before it springs back to life.
A rough start to the year
Back in January, I was calling this the year of the CTA (commodity trading advisors—professional money managers who use data-driven strategies to trade futures contracts across asset classes such as stocks, bonds, commodities, and currencies). I still am.
In 2022, managed-futures funds reminded the world that they can deliver outsized gains, even when it seems there is no safe place to turn. They seemed poised to resume their role as portfolio shock absorbers heading into this year.
Five months in, and that promise hasn’t materialized. Instead of offering protection, CTAs have looked more like plain-vanilla beta—but without any upside. The S&P 500 is roughly flat for the year, while the SocGen CTA Index (a key benchmark for CTA performance) is down about 9%. The SocGen Trend Index has flirted with a 15% drawdown.
What’s going on, and where might we be heading?
A trend toward shorter signals
One major factor in this year’s disappointing CTA performance is the industry’s quiet shift toward shorter lookback windows. Over the past decade, speed has become fashionable: Instead of waiting months for a trend signal to ripen, models started reacting after a few weeks—sometimes days—to capture moves earlier and “cut losses faster.”
On paper, it makes perfect sense. In practice, it leaves you increasingly dealing with noise, not signal. There’s less time for a real macro trend to confirm, so you end up chasing moves that feel promising one day, only to watch them reverse the next.
The thinking is that you’ll take lots of tiny cuts while hunting for the start of a true trend. But in 2025 so far, it’s been all cuts and no trend. Every hint of a trend has quickly evaporated, making it extremely hard to profit from trend following.
Politics adds another layer of whiplash
On top of that technical turbulence, there’s the very human wild card of politics. Markets have always reacted to policy, but President Trump’s influence is particularly sharp and unpredictable. A single tweet about tariffs can send investor emotions—and prices—into orbit.
These sudden moves aren’t tied to economic fundamentals, but trend models respond to price action regardless. The result? Short-term filters get pulled into reacting to every headline shock, creating volatile moves with no follow-through.
The outcome is an asset class that, for now, hasn’t delivered on its promise.
Why we still believe in trend followers
But here’s the key: The reason to own trend followers has never been their month-to-month Sharpe ratios. It’s their ability to generate asymmetric gains when conventional assets suffer sustained stress. These strategies still have a structural edge because they can be long or short anything, anywhere, without a built-in bullish bias.
(As an aside, being long and short without having to own equity beta and producing positive returns is as close to true alpha as you can get. But I digress.)
When macro conditions truly shift, like the interest-rate spike in 2022, CTAs may be the only part of a portfolio that’s in the green. Yes, the industry struggled through a grinding drawdown from 2015 to 2020, but from late 2020 through 2023, trend-following strategies delivered exactly the kind of convex payoff they’re designed for. The SocGen Trend Index topped 27% in 2022, while traditional 60/40 portfolios lost money on both sides.
That pattern of performance during major economic shifts isn’t going away just because signals have gotten twitchier.
What comes next?
If anything, the current choppiness suggests we’re sitting at an inflection point. The shorter-term crowd is getting whipsawed precisely because no durable economic trend has emerged yet.
So far, economic fundamentals continue to look decent. The political noise hasn’t sparked a full-blown global meltdown. But whether the next shift brings continued growth or a slide into recession, we’d expect to see CTAs and trend followers to start showing their value again.
A key piece of the diversification puzzle
For investors, the takeaway is simple: If you believe diversification is important to a smoother investment experience, CTAs may still deserve a place in your portfolio.
(For more on how CTAs work and their role in navigating uncertainty, check out my recent articles: “Will investors make 2025 the year of the CTA?” and “From sticky notes to CTAs: Finding opportunity in the unexpected.” And to see how Flexible Plan Investments (FPI) incorporates specialized mutual funds offering exposure to alternative asset classes into accessible investment solutions, read Jerry Wagner’s piece: “FPI brings Eckhardt’s elite trading strategies to your portfolio.”)
Trend following isn’t dead. The approach has been a disappointment so far this year, but the reason for owning trend-following investment strategies hasn’t changed: to deliver crisis alpha when the next real macro trend takes hold. I’d rather endure some noise today than find myself unprepared when that wave finally arrives.