In this update, we present the quarterly State of Trend report for Q1, 2025.
Our report covers the performance of Trend Following systems compared with traditional investments such as the S&P/ASX 200 Total Return index, and the Australia "60/40" portfolio. Trend Following provides exposure to a diverse pool of underlying instruments, and implements trading strategies systematically and without emotional biases.
Tariff turmoil impacts global markets
In Q1 2025, escalating trade tensions impacted equity markets and Q4 2024's theme of US Dollar strength. Trend following systems were impacted by such sharp reversals, although diversified exposures such as Natural Gas, Coffee, and Metals (such as Gold, Silver, and Copper) were strong performers over the quarter.
Key market movements in Q1 2025
- Increasing trade tensions and economic uncertainty reigns
- Most global equity indices (ex-Europe) were adversely impacted in Q1, and all major equity markets saw further sharp losses in early April following "Liberation Day" escalation of trade tariffs
- Bond markets started to price in the prospect of central bank rate cuts as economies digest the impact to inflation, business and consumer confidence
- The US Dollar strength theme of Q4 2024 unwound, with currency markets the immediate release mechanisms for shifting international interests
- Commodities were mixed. Metals such as Gold, Silver, and Copper were key performers to the long-side for the period (albeit the industrial metals sharply reversed in early April), along with Natural Gas and Coffee. Other contracts saw steep falls, such as Orange Juice, Cocoa, Wheat, and Bitcoin
- As global markets digest the current unpredictable newsflow, even well-diversified portfolios are feeling the effects. We
continue to see value in a consistent and methodical approach to navigate the volatility and identify the next themes to take hold
Featured chart - Gold
- Although the Gold price rally has been highlighted in the media in recent weeks, it has been in a sustained upward trend for over a year
- Gold's breakout to multi-year highs has been supported by macro drivers such as:
- Central bank buying as a diversification strategy away from the US Dollar,
- Inflation hedging, and
- Gold's status as a "safe haven" asset in the context of geo-political risks and uncertainty
- Gold's sustained rally demonstrates the type of clear directional move that trend following systems are designed to capture
See the full report at our website.
