Commodity trading advisers, a breed of quant that uses futures contracts and typically surfs the market momentum, are on course for their best year since 2014, according to a SocGen index. Risk-parity funds, which allocate based on volatility levels and hold large fixed-income positions, are heading toward their biggest annual gain since 2005, an S&P index shows.
Among the beneficiaries, there’s a sense that the easy gains are over.
Roberto Croce, a fund manager at BNY Mellon Investment Management, says risk-parity portfolios have pared bond longs given higher volatility in fixed income. The CTA index has dropped 6% since reaching a 19-month high in early September when the bond rally eased up.
As for Rudderow at Mount Lucas, his conviction is growing that value stocks are turning the corner as yields rise -- potentially signaling good news for the economic expansion and bad news for bond-proxy shares.
“You get a few times in your trading career where things are this out of whack,” he said. “If there’s anything positive on the economic growth front, that whole trade isn’t going to end well.”
This article was provided by Bloomberg News.