Risk-parity trend following across four macro assets
A robust, defensive macro portfolio can be constructed by risk-parity weighting stocks, bonds, gold, and Bitcoin, and applying a two-speed trend filter.
The argument
The guest outlined a systematic trend-following framework designed to navigate uncertain macro regimes. By using one-month and six-month trend signals to scale exposure (0%, 50%, or 100%) and adjusting the overall portfolio target volatility based on the number of positive assets, the strategy matches benchmark returns while reducing drawdowns and volatility.
The thesis, stress-tested
✓ What validates it
- ✓Outperformance of the trend program relative to a static buy-and-hold benchmark during market drawdowns
- ✓Clear, sustained directional trends in at least two of the underlying asset classes
▸ Risks discussed
- ▸Whipsawing markets can cause trend-following models to suffer consecutive false-signal losses
- ▸High correlation among all four assets during a liquidity crisis could undermine the risk-parity framework
Hear it yourself
"And so when we have all the signals across this portfolio positive, we wanna take the maximum amount of risk. When we have fewer signals, we wanna take less and less risk. And so what we do is we basically scale the target volatility of the portfolio based on the number of trend signals that we get positive."
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