A review of 2018 predictions, and a look into 2019

We’re out with our annual Managed Futures/Global Macro Outlook, reviewing what went down on a macro level in 2018, while peering into what the market environment may look like for this asset class in 2019. For a sneak peek, check out our attempt at boiling down the last 10 years of experience in the asset class to a view simple sound bites:

 

To hear our thoughts on how Ag markets may be due for a turn, if we’re headed towards a higher volatility regime, and why AI hasn’t quite dominated the space like we thought it would (yet). Download the whitepaper here.

 

PS – below we’ve got a look at how our 2018 Outlook fared in looking at what might transpire in the year gone by.

What we got right in the 2018 Outlook:

  • As FAANG goes, so goes the market (and volatility)
    We quipped, “Alexa, can you give me some volatility?” And boy did they deliver, with most of the volatility spike in equities in 2018 being driven by big sell offs in Apple, Facebook, and the like as they faced profit warnings, privacy concerns, and more.
    We were: Right (about it causing vol), Wrong (about that vol helping managed futures)

 

  • A Short VIX bloodbath hurting Managed Futures
    We noted that “an outright market sell-off which sees the VIX spike 100% or more in a day, wiping out most of the value of inverse VIX ETFs such as $XIV. There will be some blood in the streets there, to be sure (especially among the weekly option sellers). And the size of the suite of exchange traded VIX products could exacerbate things – pushing VIX higher and higher as leveraged VIX ETFs keep buying to match the move higher.”
    We were: Right (see the LJM autopsy for more)

 

  • Some equity heavy managed futures programs under performing
    Here was the line in our 2018 outlook: “beware the managed futures programs who have ‘cheated’ a little over the past few years to get additional return by adding short vol exposure to their models. They’ve been smarter than their peers for doing so the past few years but may under perform should we see a more normal vol pattern.
    We were Right, with vol exposure exacerbating losses seen elsewhere.

 

What we got wrong in the 2018 Outlook:

  • We’re way overdue for a correction
    We thought a correction was coming, that it would cause volatility expansion among a lot of markets, and that the combination would be a positive force for managed futures.
    We were: Wrong (about it driving profits, it caused losses as a reversal of the trends), but Right (about the correction).

 

  • More crypto craziness
    We thought the fever pitch of crypto might bleed into manager portfolios and drive some profits due to the volatility there.
    We were: Wrong (Bitcoin and other cryptos went essentially straight down, with hardly any multi-market portfolios adding the futures to their trading).

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

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