Managed Futures Can Benefit Portfolio Despite Election Results

With 2024 being a presidential election year, it may spark notions of heavy volatility. But a study by U.S. Bank investment strategists point to the contrary. That said, a managed futures strategy can benefit a portfolio irrespective of the election results.

The study examined election results from the last 75 years to identify market patterns that tended to repeat. What the investment strategists found was that elections have little impact on the performance of the market. Yet other trends related to inflation and the economy do have a tangible impact.

“Overall, the analysis points to minimal impact on financial market performance in the medium to long term based on potential election outcomes,” the article noted. “The data also shows that economic and inflation trends have historically demonstrated a stronger, more consistent relationship with market returns than election results.”

The past few years have underscored the impact of inflation on market performance, especially in 2022. Both stocks and bonds were under heavy selling pressure before the 2023 turnaround.

“In general, rising growth and falling inflation have been associated with returns that are considered above long-term averages, while falling growth and rising inflation have corresponded to positive but below average market returns,” the article noted. “For investors, staying focused on these patterns is probably more insightful than potential election outcomes when it comes to predicting market performance.”

A Trend-Following Strategy in One ETF

Rather than pore over market trends to identify opportunities, there’s an easier way via a managed futures strategy. Even better than that is getting that level of strategic exposure in one ETF through the iMGP DBi Managed Futures Strategy ETF (DBMF).

With its active management, the fund provides dynamic market exposure where seasoned portfolio managers can easily adjust holdings in the fund to coincide with changing market conditions. Portfolio managers can add to or subtract from the fund’s holdings when market conditions suggest an adjustment.  As the study mentioned, the 2024 election year may have no profound impact on the the market, but a managed futures strategy can work when there’s upside or downside. This certainly speaks to its versatility and thus makes a perfect complement to a portfolio.

At its core, DBMF comprises domestically managed futures and forward contracts selected by the Dynamic Beta Engine. This strategy analyzes the trailing 60-day performance of commodity trading advisor hedge funds. It then determines a portfolio of liquid contracts that would best mimic the hedge funds’ average performance.

DBMF takes long positions in derivatives with exposures to asset classes, sectors, or markets that are anticipated to grow in value. It takes short positions in derivatives with exposures expected to fall in value. This allows the fund to capture the upside while also protecting the downside during heavy selling.

For more news, information, and analysis, visit the Managed Futures Channel.