In this update, we present the quarterly State of Trend report for Q3, 2024. 

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.

Challenger quarter for most trend following systems

Although the majority of trend following systems were down for Q3 2024, ECCM's Systematic Trend Fund demonstrated strong positive divergence. Major equity and bond markets delivered positive returns for the quarter as several Central Banks commenced rate cuts. Commodity markets also performed strongly, particularly in agricultural sectors.

Key market movements in Q3 2024

• Q3 2024 saw a return of confidence to several major equity and bond markets, as global Central Banks moved to implement rate cuts

• In the Commodities, long-side performance was dominated by soft commodity markets, with Cocoa, Rubber, Oats, Coffee, Orange Juice, Sugar and Lumber in the top 20 performing instruments for Q3. Gold and Lean Hogs also closed the quarter up over 5%. Short-side returns presented in Crude Oil and Brent Crude, notwithstanding global geopolitical tensions

• In Currency markets, the Japanese carry trade stalled significantly in Q3, albeit has recovered into Q4

• Clearly, with ongoing whipsawing in global markets, some trend following managers have struggled to maintain results through this period, however ECCM STF has delivered positive divergence compared to its peers with strong returns for the quarter and last 12 months

• In our view, Trend Following continues to be an attractive alternative asset class. This quarter has shown the benefit of diversification into Commodities - a feature of several Trend managers includes access to a range of instruments not widely traded by traditional asset managers

Featured chart - Rubber

• Rubber traded up ~25% over Q3, continuing an up-trend that emerged in early 2023

• The rubber market is influenced by factors such as product demand (e.g. for tires, belts, hoses and seals), and on the supply side, environmental and social impacts associated with Southeast Asia (the source of ~70-80% of natural rubber) and oil prices (as synthetic rubber is derived from oil and natural gas)

• Trend systems can provide access to relatively exotic instruments such as rubber futures - which most investors will not typically have exposure to in their portfolios - and will enter and exit trades dispassionately based on price action

See the full report at our website.