Volatility Is Back… Embrace It!

Over the past few years, the U.S. Central Bank served as a calming drug by forcing both fundamentals and technicals to take a backseat. One side effect? Markets became lazy and complacent. Traders sat in their chaise lounges as phases of quantitative easing came and went. Volatility plummeted as a result. Trends in liquid markets became short-lived and experienced sharp reversals, making it hard for trend followers to capture moves. But now, after all of the Fed’s tactics have run their course, volatility is back – and the commodities sector is once again supporting trend followers. Here’s how you can benefit… Pain Management Comes to an End There’s no question that recent years have created a challenging environment for managed futures traders and commodity trading advisors (CTAs). With volatility low, the returns of systematic traders and trend followers suffered. This is reflected in the Barclay CTA Index, which experienced three consecutive negative years from 2011 to 2013. Low Volatility Spurs Back-to-Back Negatives: Barclay CTA Index What made this latest trend so intriguing was its length. Since its launch in 1980, the Barclay CTA Index never had consecutive negative years. As you would expect, assets under management in this class exited, … continue reading

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