Key Takeaways
- • Trend-following funds launched 2026 with nearly 4% gains in early weeks, marking the second-strongest start on record for the Societe Generale index tracking major momentum strategies since 2000, following rallies in metals, weakening yen, and resilient global equities.
- • Market whipsaws—exemplified by Tuesday's sell-off amid US-Europe Greenland tensions and Japanese bond stress, followed by rapid rebound after Trump signaled deal framework—test the viability of momentum models in fast-moving modern markets and echo tariff-driven volatility patterns from the Trump era.
- • The sector faces a critical evolution challenge: trend-following funds trailed a basic stock-bond portfolio by double digits for three consecutive years, an unprecedented streak in the index's history, raising questions about whether traditional momentum edge can survive without fundamental model restructuring.
- • Andrew Beer, managing member of Dynamic Beta Investments (which runs the largest managed futures ETF), expressed cautious optimism that sustained 2026 trends could deliver strong performance without the sharp reversals that plagued the sector in 2025.
Summary
Trend-following funds are reclaiming investor attention in early 2026 after years of underperformance, posting gains that signal renewed viability for momentum-driven quant strategies. The Societe Generale index tracking major trend-following funds climbed nearly 4% in the opening weeks of 2026, the second-strongest start recorded in the gauge's two-decade history. This rebound follows price moves that favor momentum strategies—including rallies in metals, a weakening Japanese yen, and resilient global equities—creating the sustained directional trends these portfolios require to generate returns.
However, the gains arrive amid intense scrutiny over strategy durability. For three consecutive years through 2025, the SocGen index underperformed a basic stock-bond portfolio by double-digit margins, an unprecedented losing streak that forced the industry to confront structural questions about whether traditional momentum models can function effectively in contemporary volatile markets. The sector had become partially dismissed by institutional investors amid this performance drought and the 2022 inflation shock that disrupted momentum correlations.
Recent market action underscores both the opportunity and the risk. On Tuesday, major assets sold off sharply following escalating US-Europe tensions over Greenland and emerging stress in Japanese bond markets. Within hours, positions reversed as President Donald Trump signaled a framework for resolving the Greenland dispute, creating sharp whipsaws that can quickly erase momentum strategy gains. These reversals echo the tariff-driven volatility that characterized Trump's previous administration and remain a persistent challenge for models designed to capture sustained price trends.
Andrew Beer, managing member of Dynamic Beta Investments (operator of the largest managed futures ETF), articulated the industry's cautious outlook: "The optimistic view is that there could be a number of very strong trends this year that will contribute a lot to performance and you won't have the sharp whipsaws that we saw last year." This reflects a broader debate within the quant community about how to preserve momentum edge while building resilience against the rapid policy reversals and geopolitical headline volatility that characterize modern markets. The sector's challenge is threading a needle between maintaining strategy fidelity and adapting to market structure changes without diluting the fundamental alpha source that justified momentum allocation in the first place.
However, the gains arrive amid intense scrutiny over strategy durability. For three consecutive years through 2025, the SocGen index underperformed a basic stock-bond portfolio by double-digit margins, an unprecedented losing streak that forced the industry to confront structural questions about whether traditional momentum models can function effectively in contemporary volatile markets. The sector had become partially dismissed by institutional investors amid this performance drought and the 2022 inflation shock that disrupted momentum correlations.
Recent market action underscores both the opportunity and the risk. On Tuesday, major assets sold off sharply following escalating US-Europe tensions over Greenland and emerging stress in Japanese bond markets. Within hours, positions reversed as President Donald Trump signaled a framework for resolving the Greenland dispute, creating sharp whipsaws that can quickly erase momentum strategy gains. These reversals echo the tariff-driven volatility that characterized Trump's previous administration and remain a persistent challenge for models designed to capture sustained price trends.
Andrew Beer, managing member of Dynamic Beta Investments (operator of the largest managed futures ETF), articulated the industry's cautious outlook: "The optimistic view is that there could be a number of very strong trends this year that will contribute a lot to performance and you won't have the sharp whipsaws that we saw last year." This reflects a broader debate within the quant community about how to preserve momentum edge while building resilience against the rapid policy reversals and geopolitical headline volatility that characterize modern markets. The sector's challenge is threading a needle between maintaining strategy fidelity and adapting to market structure changes without diluting the fundamental alpha source that justified momentum allocation in the first place.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.