In this update, we present the quarterly State of Trend report for Q2, 2024. As we publish this report, incredibly volatile market conditions have emerged. With global equity markets falling in recent days, we see value in alternative asset classes. 

Our report covers the performance of Trend Following systems compared with traditional investments such as the S&P/ASX 200 Total Return index, and the Australia "60/40" portfolio. Trend Following provides exposure to a diverse pool of underlying instruments, and implements trading strategies systematically and without emotional biases.

Subdued quarter for trend following systems

Trend following systems were down slightly for Q2 2024, with key trends from Q1 having moderated this period, including in equities. Diversified asset exposure across commodities and currencies helped to buffer performance in the context of what was a "whipsaw" quarter.

Key market movements in Q1 2024

• Q2 2024 was a more challenging quarter for returns, with major equity indices moderating and bond markets continuing to deliver muted results
• Commodity markets were mixed, with long-side performance delivered by metals such as Silver and Copper, and soft commodities such as Coffee and Orange Juice, and short-side returns in instruments such as Cotton, Lumber and Lean Hogs
• US Dollar strength was a key theme for the quarter, with the US Dollar outperforming against Asian currencies such as the Japanese Yen and Korean Won, and South American currencies such as the Mexican Peso and Brazilian Real
• With significant uncertainty in markets due to ongoing global macroeconomic concerns, the commencement of rate cuts, escalation of tension in the Middle East, and continuing focus on the upcoming US Presidential Election, we can continue to expect volatility, with financial instruments such as equities and bonds at the forefront
• Given the number of "wildcards" on the horizon, in our view, Trend Following, with its in-built risk management framework and inherent diversification of underlying instruments, continues to be an attractive alternative asset class

Featured chart - S&P500

• The S&P500 has continued to perform strongly, and reached all time highs of almost 5,700 in July
• The level of concentration of the index is high, with nearly a third of the index across seven technology sector stocks - and the rate of increase in concentration has been rapid
• With risks to the American economy (hard landing / recession, inflation, unemployment), as well as global macroeconomic and the Presidential election, commentators are questioning whether a correction may be near or even underway
• Trend Following provides exposure to the S&P500 as it trends, but will also exit the trade without emotion as and when the trend reverses