Trend tracking CTA hedge funds suffer as stock and bond markets rally

Louis Goss is a MarketWatch reporter based in London.

Trend tracking CTA hedge funds, which seek to trade on momentum in market movements, have failed to cash in on the recent market rally that has seen stock and bond prices soar,The HFRX diversified CTA index has dropped 2.5% this month, while the iShares 20+ year Treasury bond ETF TLT has gained 6%, and the S&P 500 SPX has added 4%.

Now, this dynamic has started to reverse, in a shift that has seen trend tracking CTA funds suffer even as markets have rallied. This dynamic has now gone into reverse, as growth in major economies has started to slow and the labor market has started to cool. The shift has seen central banks take a more dovish stance when it comes to increasing interest rates.

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