The phrase “expect the unexpected” can certainly apply to the capital markets, especially with 2024 just around the corner. That said, investors can prep for the new year with exposure to managed futures.
The expectation of more volatility in 2024 is shared among a number of investment professionals. With ongoing geopolitical risk and the market fluctuations caused by Fed interest rate policy, the need to diversify is imperative.
An Investopedia article highlighted a 2023 MFS Asset Allocation Survey of investment professionals regarding the pulse of the market in 2024. One of the key data points was the expectation of an economic contraction. That’s making asset managers turn to bonds to dampen any potential market shocks.
“Around half the respondents expected a mild economic contraction over the next year, with 52% saying they had raised the duration of their bond holdings in response to this,” noted Investopedia.
“Recent actions taken to de-risk portfolios are understandable as we believe the full effects of higher interest rates have yet to be felt,” said Jonathan Barry, managing director at MFS. “That said, higher rates make fixed income more attractive now. And our survey shows investors see opportunities across a number of asset classes.”
Bonds can offer a the traditional hedging component to equities exposure. Another option investors may want to consider is managed futures. While the thought of dabbling in futures contracts may sound daunting to most investors, there’s an easier solution via the iMGP DBi Managed Futures Strategy ETF (DBMF).
Actively Managed Futures Exposure
DBMF offers investors active management. That style 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 warrant a change. That will prove beneficial in 2024. That’s especially so with an election year that could undoubtedly bring market uncertainty and volatility.
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 investors to capture the upside while also protecting the downside in heavy volatility.
For more news, information, and analysis, visit the Managed Futures Channel.