Rethinking Trend Investing: Alternative Signals, Not Alternative Markets

Trend-following strategies can improve portfolio diversification, but their effectiveness hinges on signal generation, not market breadth. The article argues managers should focus on diverse, alternative inputs rather than expanding into illiquid markets. This "trend 2.0" approach uses macro trends, sentiment analysis, and advanced technologies like deep learning to identify nuanced, early-stage market shifts.

This deeper signal analysis is crucial given today's volatile environment marked by inflation and geopolitical shifts. While traditional trend followers may struggle with whipsaws in choppy markets, enhanced strategies can better capture sustained directional moves. Investors should watch for how these strategies adapt to capture latent trends and provide uncorrelated returns, especially during periods of market stress.