Ask any self-respecting trend follower what kind of market environment favors their strategy, and you’ll get the usual suspects: volatility, uncertainty, macro and geopolitical stress, inflation, deflation, recession. But here’s the thing—those are just the conditions. The real driver? Signal versus noise. Trend needs signal.

In 2022, the signal was deafening: inflation fears, war in Ukraine, and ultimately, realized inflation. Since 2023? More like a symphony of noise. Just look at U.S. rates: 10-year yields dipped below 3.5% in April ’23 on recession fears… then hit 5% by October on “higher for longer.” They slid below 4% in Jan ’24 (soft landing), bounced to 4.5% by April (higher for longer again), dipped back under 4% in September (post-Yen carry unwind, recession vibes), then shot above 4.5% in Jan ’25 (pre-inauguration pro-growth Trump trade), and—you guessed it—dropped back under 4% in April (DOGE, tariffs, not pro-growth but outright recessionary).

Now? Sitting around 4.25%. Inflation somewhat contained, rate cuts priced back in, Powell in “wait and see” mode, Trump less patient. And the noise in rates has bled into currency markets, with the Dollar following the same pattern. Gold, meanwhile, has thrived—because all this noise produced plenty of signal in that market. But it just isn’t a big enough position in a diversified trend following portfolio.
So, is trend following broken? Short answer: no. Long answer: systematic trend following (Managed Futures) exists to harvest the investor risk premium in the futures market by accepting price risk through time. It produces a positively skewed return distribution that enhances traditional stock/bond portfolios. That distribution naturally includes stretches of noise. This isn’t new.

What is key: transitions from noise to signal can’t be timed. Which is why the system matters. Strip out human bias. Don’t let yesterday’s result taint tomorrow’s decision. It’s like flipping a coin—the last toss doesn’t affect the next—but over enough observations, the distribution is consistent. And asset allocators, religiously rebalance uncorrelated investments (yes…that means sell winners and buy losers).