SI394: The Quarter That Tested Every Trend Follower ft. Katy Kaminski & Harry Moore

In this episode of Top Traders Unplugged, Niels Karstrup-Larsen hosts Katy Kaminski and Harry Moore to dissect the volatile Q1 2026 market environment, which tested the resilience of trend-following strategies. Despite a challenging quarter marked by sharp reversals in equities, bonds, and commodities—most notably a steep drop in gold and a historic energy surge—trend following outperformed the MSCI World Index for the sixth consecutive month. The conversation explores why this success occurred: the ability of trend strategies to pivot quickly, diversify across asset classes, and capture macro-driven moves. The guests analyze key papers on optimal market mix, crisis alpha, portable alpha, and drawdown resilience, emphasizing that traditional markets excel in crisis scenarios due to their strong macro exposure, while alternative markets offer higher long-term Sharpe ratios. A central theme is the importance of cash efficiency and liquidity in stress periods, with trend following proving uniquely effective due to its low funding needs during volatility. The episode also addresses investor psychology, survivorship bias, and the critical need for proper alpha decomposition when evaluating macro managers. As geopolitical risks and market complexity grow, the hosts stress the enduring value of systematic, non-correlated strategies in portfolio construction. Key takeaways include: (1) Trend following’s strength lies in its ability to adapt to macro shifts, especially during crises; (2) Investors should distinguish between pure trend and hybrid strategies to avoid misleading performance comparisons; (3) Portable alpha via trend can enhance equity portfolios with minimal cash commitment and superior drawdown control; (4) Drawdowns are inevitable but statistically predictable—persistence through them is key; (5) The market universe matters: traditional markets are optimal for crisis alpha, while broader, alternative markets boost long-term returns; (6) Cash buffers are essential in portable alpha structures to prevent forced liquidations; (7) Alpha in macro strategies must be rigorously isolated from equity and trend exposure; (8) Despite market volatility, trend following remains underallocated, underscoring the need for continued education and advocacy.