Given the stock market turmoil, a timely question is whether the U.S. Federal Reserve (the “Fed”) will act to stem the tide of losses as it has done during prior stock market declines. A bloated Fed balance sheet and historically high inflation suggest that this time the Fed will be unable to act to save the market.
To obtain the best long-term risk-adjusted performance, investors should combine multiple trend-following factor strategies into a single portfolio.
Applying a relatively single-indicator trend-following strategy is an excellent way to obtain meaningful exposure to the overall market with significantly lower downside risk and higher long-term risk-adjusted returns.
For those who believe that capital markets should be free from undue government interference, the Fed’s adoption of expansive programs raises the question of whether it has gone too far.