Chart of the week
Blind Taste Test
What does this chart show?
The blue line performed better than the red line over the full period of 2000-2022 and had strongly positive performances during the major crises of the past two decades when the red line suffered significant losses. Over the full period the blue line posted a 6.4% annual return, beating the 4.4% annual return of the red line.
Why does it matter?
The blue line represents what many investors and advisors say that they want - strong absolute performance over full market cycles, positive performances during deeply negative periods for stocks, and a positive performance during an inflation shock.
The Bottom Line
The blue line is the SG Trend Following Index1 and the red line is a global 60-40 portfolio. If you are open to thinking differently, consider an allocation to trend following strategies as a replacement for bonds in a diversified portfolio, or consider trend following on some, or all, of your asset classes. It’s worked for a century and continues to.
If you’re interested in learning about trend following, here is the best piece I’ve read on it, and here is a very quick explanation.
Chart & Data Sources - AQR: Trend-Following: Why Now? A Macro Perspective
