Opportunity Clues in Trend-Following ETFs

The wait is over and the change in rate policy is here. The Federal Reserve delivered a 50-basis-point rate cut this week. We largely knew that a cut was coming. But we don’t know whether the cut will feed investor confidence in economic conditions, or feed into fear of possible recession.

It’s no surprise that diversification remains the call of the day. But if we were to reposition or redeploy cash from the sidelines, where should we look to go?

I went looking for clues among the trend followers.

Trend following is an exercise in technical analysis, systematic rules following, and signals reading that’s objective and agnostic. A trend follower leaves bias at the door, and simply follows price trends of assets wherever they may take them.

This “buy” what’s working, “short” what’s not is an approach that hardly makes for flashy risk taking. On the contrary, trend following is usually good at managing risk as position entry points are as important as the exit.