Key Takeaways
- • The Nordic CTA Index (NHX) posted modest declines in March 2026 following US and Israel attacks on Iran, with energy market gains offset by losses in equities and fixed income, demonstrating the cross-asset volatility challenges managed futures strategies faced during the geopolitical escalation.
- • Trend-following strategies significantly underperformed relative to non-trend strategies during March, as initial reversals following the Iran attacks were followed by choppy, conflicting signals across asset classes that penalized momentum-based approaches.
- • Equity indices declined sharply while the VIX spiked to levels unseen since the prior year's "Liberation Day" announcement, driven by disappointing US jobs data and market concerns that elevated oil prices could trigger inflation and delay Federal Reserve rate cuts.
- • Oil prices surged above $100 per barrel (reaching $109-$112 by early April) on fears of extended regional conflict and disruption through the Strait of Hormuz, while fixed-income yields rose as inflation concerns overrode safe-haven demand.
- • US dollar strength accelerated on haven-seeking flows amid Middle East tensions, while diplomatic efforts and Trump administration negotiations in early April began to support cautious market recovery, with the S&P 500, Dow, and Nasdaq all posting modest gains on ceasefire hopes.
Summary
March 2026 proved challenging for managed futures strategies as geopolitical escalation in the Middle East created the dominant market dynamic. Following US and Israel attacks on Iran, the Nordic CTA Index declined modestly on an aggregate basis, with the diversification benefits of systematic trend-following strategies tested by sharp cross-asset volatility. Energy market gains—driven by oil price spikes—were insufficient to offset simultaneous losses in equities and fixed income, a pattern that highlighted the difficulty of navigating competing directional pressures across major asset classes.
Trend-following managers, traditionally the backbone of CTA performance, struggled significantly during the period. According to RPM's Market Divergence Index (MDI), time-series momentum strategies experienced initial setbacks as many established trends reversed abruptly following the Iran attacks. While the MDI recovered to slightly above average levels for the remainder of March, this recovery masked persistent challenges: reversing trends in equities and metals competed with newly formed trends in energy and fixed income, leaving trend-followers whipsawed between conflicting signals. In contrast, non-trend-based strategies outperformed, suggesting that dynamic and discretionary approaches better navigated the environment's structural shifts.
Equity markets deteriorated under pressure from both macroeconomic and geopolitical headwinds. Stock indices declined as the VIX surged to levels not seen since the prior year's "Liberation Day" announcement, driven by a disappointing US jobs report that compounded concerns over energy disruption. Market participants feared that sustained elevated oil prices, combined with supply chain disruption through the Strait of Hormuz, could trigger a significant inflation shock and force central banks—particularly the Federal Reserve—to pause or delay rate cuts, removing a key support for risk assets.
Fixed income and currency markets reflected heightened inflation and safe-haven concerns. In fixed income, yields moved sharply higher as inflation fears outweighed the traditional safe-haven premium associated with bonds. In currency markets, the US dollar strengthened significantly, driven primarily by haven demand amid ongoing tensions. Crude oil prices, meanwhile, surged above $100 per barrel in March and continued climbing into early April, with Brent crude reaching $109 per barrel and West Texas Intermediate trading above $112, as markets priced in the risk of prolonged regional conflict and Strait of Hormuz disruptions.
By early April, tentative signs of diplomatic progress began to shift sentiment. President Trump's extended negotiation deadline and reports of ceasefire discussions between Iran and the US, facilitated by Pakistan and international mediators, supported cautious optimism for de-escalation. US equities responded positively, with the S&P 500 rising 0.4%, the Dow gaining 0.3%, and the Nasdaq adding 0.5% on April 7, 2026, as traders weighed the likelihood of a resolution that could ease both energy supply concerns and inflation risk.
Trend-following managers, traditionally the backbone of CTA performance, struggled significantly during the period. According to RPM's Market Divergence Index (MDI), time-series momentum strategies experienced initial setbacks as many established trends reversed abruptly following the Iran attacks. While the MDI recovered to slightly above average levels for the remainder of March, this recovery masked persistent challenges: reversing trends in equities and metals competed with newly formed trends in energy and fixed income, leaving trend-followers whipsawed between conflicting signals. In contrast, non-trend-based strategies outperformed, suggesting that dynamic and discretionary approaches better navigated the environment's structural shifts.
Equity markets deteriorated under pressure from both macroeconomic and geopolitical headwinds. Stock indices declined as the VIX surged to levels not seen since the prior year's "Liberation Day" announcement, driven by a disappointing US jobs report that compounded concerns over energy disruption. Market participants feared that sustained elevated oil prices, combined with supply chain disruption through the Strait of Hormuz, could trigger a significant inflation shock and force central banks—particularly the Federal Reserve—to pause or delay rate cuts, removing a key support for risk assets.
Fixed income and currency markets reflected heightened inflation and safe-haven concerns. In fixed income, yields moved sharply higher as inflation fears outweighed the traditional safe-haven premium associated with bonds. In currency markets, the US dollar strengthened significantly, driven primarily by haven demand amid ongoing tensions. Crude oil prices, meanwhile, surged above $100 per barrel in March and continued climbing into early April, with Brent crude reaching $109 per barrel and West Texas Intermediate trading above $112, as markets priced in the risk of prolonged regional conflict and Strait of Hormuz disruptions.
By early April, tentative signs of diplomatic progress began to shift sentiment. President Trump's extended negotiation deadline and reports of ceasefire discussions between Iran and the US, facilitated by Pakistan and international mediators, supported cautious optimism for de-escalation. US equities responded positively, with the S&P 500 rising 0.4%, the Dow gaining 0.3%, and the Nasdaq adding 0.5% on April 7, 2026, as traders weighed the likelihood of a resolution that could ease both energy supply concerns and inflation risk.
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