The Trend is Our Friend - Global
The Trend is Our Friend is a global, multi-asset tactical strategy developed by researchers Andrew Clare, James Seaton, Peter N. Smith, and Steve Thomas, published on SSRN in 2015. It combines risk-parity weighting with a trend-following filter to build a portfolio that participates in rising markets while stepping aside into cash during downtrends.
Average Allocation
Based on historical average weights across all rebalance periods.
Performance Snapshot
Rolling Returns
| Period | Low | Average | High |
|---|---|---|---|
| 1 Year | -7.4% | +8.6% | +34.2% |
| 3 Year | -1.2% | +8.5% | +21.1% |
| 5 Year | -1.0% | +8.7% | +18.1% |
| 10 Year | +1.4% | +8.8% | +15.5% |
Growth of $10,000
Historical Drawdown
Percentage decline from the portfolio's peak value at each point in time.
Rolling Returns
Annualised return for each rolling period ending on that date.
Annualised return for each 1Y period ending on that date.
Investment Philosophy
The strategy addresses a core behavioral challenge: most investors cannot stomach the large drawdowns that come with passive global equity exposure, but discretionary market timing is unreliable. The researchers' answer is a mechanical system that uses each asset's long-term moving average as a binary signal to stay invested or move to cash -- no forecasting required. Risk-parity weighting ensures that no single volatile asset class dominates the portfolio in either direction.
Who It's For
Suited to medium-to-long-term investors who want global market participation but have low tolerance for large drawdowns. Investors must be comfortable executing monthly trades and committed to following the rules mechanically without discretionary override.
Pros
- Historically strong drawdown control compared to passive global equity investing
- Globally diversified across equities, bonds, commodities, and real estate
- Academic research backing from peer-reviewed publication
- Risk-parity weighting reduces concentration in the most volatile asset classes
Cons
- Monthly rebalancing required -- more active than passive alternatives
- Significant average cash allocation limits upside during sustained bull markets
- Trend-following can underperform for extended periods in sideways markets
- Sensitive to rising interest rates due to bond-heavy risk-parity weighting
Technical Notes
The trend filter checks each asset against its 10-month simple moving average at month end. Assets trading below their average are replaced with cash for that period. Monthly turnover makes tax-advantaged accounts preferable. For a related strategy with similar trend-following mechanics and a broader asset universe, see GTAA 13 by Meb Faber.
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