SI408: Has Trend Following Changed Forever? ft. Alan Dunne

Systematic trend-following strategies face a shifting landscape driven by evolving market microstructure and changing central bank communication policies. Recent research highlights that the performance degradation of short-term trend following stems largely from volatility-adjusted tick sizes, which limit the ability of managers to capture large directional moves, rather than industry saturation or electronification. Simultaneously, the Federal Reserve’s transition toward a more opaque communication style under Kevin Warsh signals a move away from forward guidance, potentially increasing market volatility as participants must infer policy paths directly from economic data. Amid these changes, investors are increasingly adopting total portfolio approaches that prioritize behavioral exposures over traditional asset class silos. These shifts underscore the necessity for systematic managers to adapt execution models and risk management frameworks to navigate a market environment where traditional momentum signals are increasingly challenged by mean-reverting high-frequency participants and changing liquidity dynamics.