Markets continue to evolve, and so do the strategies designed to navigate them. Alan Dunne joins Niels Kaastrup-Larsen to explore why changes in market structure may have permanently altered short term trend following, and what that means for systematic investors. They discuss a fascinating new research paper on market microstructure, the changing role of liquidity, the rise of high frequency trading and why faster no longer necessarily means better. Along the way they examine the Federal Reserve's evolving communication strategy, the outlook for commodities, and why regime change continues to create both risks and opportunities for trend followers.
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Episode TimeStamps:
00:00 - Summer reading, Jeremy Grantham and lessons from early quantitative investing
05:22 - Shrinking retail products, smaller futures contracts and the rise of retail trading
12:18 - First half performance review for CTAs and trend followers
15:36 - Commodity markets, Middle East tensions and the AI driven demand story
20:09 - Kevin Warsh, Fed communication and a new era for monetary policy
30:34 - Why regime change strengthens the case for trend following
38:34 - The research behind the decline of short term trend following
46:44 - Tick size, liquidity and what changed in market microstructure
49:43 - Alternative explanations for why fast trend has struggled
55:35 - Execution, market participants and the future of systematic trading
01:00:45 - Final thoughts on the next evolution of trend following
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