For decades, trend-following built its reputation by delivering strong returns across a wide range of market regimes. The 1970s inflation, the ’87 crash, the LTCM and Russia/Asia crises, the dot-com and subprime boom-busts, and most recently the 2022 collapse of the 60/40 portfolio. But it was never a one-trick pony in the sense that it only worked by being short stocks or long bonds in a crisis. It also profited from sustained trends in commodities when supply shocks occurred in markets like tin, cocoa, and palladium, or in currencies when a country’s monetary policy shifted or it defaulted.

What made trend-following great was taking an old idea of holding a perpetual long position in stocks and/or bonds, expanding the opportunity set to all other asset classes and to, are you ready for this, actually adapt to the present trends. It didn’t allow itself to be bogged down by dogmatic beliefs about the markets. No…in its simplest form, trend-following is open-minded and opportunistic.

So, for a long time there were many elements that contributed to this golden era. In no way can I name and explain every single one. No one has these answers, but here are few notable tide-shifts that help foster many large trends. Interest rates went through a multi-decade cycle, from sky-high under Volcker in the early 80s to grinding lower for the next 30 years. New futures markets kept opening up in the 1980s and 90’s in currencies, bonds and stock indices. And perhaps most importantly, economies moved independently of each other. Recessions, bubbles and crises tended to be their own standalone events, not one big risk-on/off trade driven by global monetary policy. This is the environment trend-following thrives upon. Real, sustained divergence between markets.

As the years passed, professional investors took notice of its strong performance. But combining their reluctance to depart from sizable allocations to their precious stocks and the trend-following industry’s collective imposter syndrome, trend-following still didn’t receive a meaningful slot within the institutional portfolio. 60/40 was still king kong. Other “alternatives” such as long-short hedge funds and private equity got the bulk of the allocations but I digress.

A Decade of Whipsaws, V-Bottoms and Tops

After the 2008 crisis, central banks worldwide went into coordinated rescue mode to keep everything calm and under control by lowering rates to zero (in some places negative) and buying trillions of bonds. Mario Draghi’s “whatever it takes” in 2012 became the whole playbook and was copied by nearly every major central bank. Pair this with a severe lack of unexpected events and you get an unfit environment for major trends to occur.

It was a decade where almost nothing moved independently. Stocks, bonds and currencies all tethered together. Commodities didn’t do much; no droughts, storms, disease or supply issues. No outliers. Just one big risk-on/off trade for what felt like forever. Industry people started calling it the “CTA winter,” and boy were they right. The few trends we did get — gold in 2011, FX in 2014 — weren’t that large and were short-lived.

The 2015-2018 stretch was particularly hard as whipsaws dominated the market action. So, with a decade of mediocre returns piling up as stock markets stormed to new highs, many investors concluded trend-following didn’t work anymore. Hell, even some managers themselves succumbed to this new “reality” by changing their investment strategies or quitting altogether. It was that bad.

The Washout

One bad stretch, albeit a lengthy one, was all it took for investors and some managers to throw away decades of a proven philosophy. Even with this recent poor spell, the long-term track records of trend-followers were stellar — way better than the stock market even. So, how could everyone abandon it like this?

I saw many trend-followers disappearing. Either they quit, retired, passed away or evolved into more of a multi-strategy operation where they diluted their trend-following commitment. I had mixed feelings about this. On one hand, I was sad to see the people I looked up to for so long go away. On the other, I saw opportunity. I knew at some point trends would inevitably come back for whatever reason(s).

I believe it was some time in 2018 that I came to the conclusion that a period like this was always going to occur. Just because trend-following had a strong history didn’t mean it couldn’t get roughed up like any other asset class. Stock indices had gone through many lost decades and large drawdowns. Same goes for bonds, commodities and currencies. Hell, individual stocks routinely went out of business — even the ones that had been good companies at one time. Currencies were routinely debased and swept away for new ones. This period was just trend-following’s turn to experience it.

Markets Wake Back Up — COVID, Inflation, War

COVID seems to be the catalyst that broke the ZIRP-era malaise. The fallout brought surging inflation and rate-tightening not seen in 40 years. Throw in Russia invading Ukraine and you have a recipe for some very large moves and that’s exactly what we got.

The 2020-2022 stretch was the best three-year period (by a long shot) since the start of the CTA winter in 2011. It felt like a return to the good old days. This is what trend-following is built for. This is why you include it in a portfolio. Moves were widespread across equities, bonds, crypto, currencies and especially commodities. Trends were abundant and trend-following was reminding everyone of its value. This was especially the case in 2022 when the 60/40 portfolio got hammered. Trend-following delivered on both fronts once again — the absolute returns and crisis alpha.

That being said, it hasn’t been a smooth ride since. 2023 rough, but performance rebounded in 2024 thanks to an incredible trend in cocoa. 2025 was rough as well with the intense tariff-related whipsaws, but 2026 has gotten off to a strong start due mostly to precious metals and petroleum.

Overall, this period reinvigorated some confidence within the investment community. It delivered during the inflation surge, again when 60/40 failed, from an outlier move in an unloved commodity like cocoa and then most recently as metals and energies have taken off.

Try Not to Fall for Stories

Given the recent developments in AI and the rush to build out data centers, the green energy push, re-onshoring of supply chains following COVID, the chronic underinvestment of commodity-producing infrastructure not to mention the recent escalating tensions with Iran (plus ongoing Russia-Ukraine war) investors are beginning to form a story about what trends will occur in the coming years. 

The backdrop is real. Which market it shows up in next is not something anyone can call in advance, but that’s the part people turn into a story.

A popular one going around is the Commodity Supercycle. It sounds plausible. A lot of smart people are making a compelling case. Hell, I am kind of rooting for it. But I root for major moves of any kind in any asset class, not necessarily only in commodities. When these enticing stories make the rounds on podcasts, on tv or through blogs and major publications, the narrative becomes a “done deal” in people’s minds. Our human condition craves to medicate our fear of the unknown (the future) and clings to a story that helps us feel better. It’s that simple…and that dangerous. We must not fall into this trap.

A major edge for trend-followers is sitting back observing markets without any opinion whatsoever. No judgement on what is or isn’t happening. It’s a hard state to get to because how can we not have opinions about things, especially the markets we trade and track every day? That’s why we don’t rely on willpower to stay neutral but instead build a process that does it for us.

The conditions that built trend-following’s reputation in the first place — genuine divergence between markets and economies, real policy shifts, booms and busts, that steady hum of chaos — are showing up again after a decade in hiding. Nobody knows if this turns into another thirty-year run. But since 2020, markets have looked a lot more like 1980-2010 than 2011-2019. People forgot what trend-following was built for. It’s in the process of reminding them.