Topic · Systematic Strategies & Alpha
← All topicsCross-Asset Strategies
36 articles · 6 checkpoints · 24 deeper reads · 6 reference notes
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Carry is the return you collect just for holding a position while nothing changes, an interest-rate gap in currencies, a futures roll in commodities, a coupon in bonds, a dividend yield in equities, and building one basket that holds the highest-carry asset in every market at once is one of the oldest systematic trades there is.
GTAA takes a portfolio's long-run policy weights across stocks, bonds, currencies and commodities and tilts them, gradually and with tight limits, based on valuation and momentum signals, a small, deliberate deviation from the strategic plan rather than a full market-timing bet.
Buying a foreign stock means buying two things at once, the stock and its currency, and whether to strip the currency back out with a forward contract depends on the asset class, the horizon, and whether you actually want the extra volatility currency brings.
For most of the 2000s and 2010s, bonds rallied when stocks fell, making a 60/40 portfolio genuinely diversified, but that relationship flips when inflation, not growth, is the thing scaring markets, and 2022 was a brutal reminder that the correlation itself is a regime, not a constant.
The same handful of return drivers, value, momentum, carry, low-risk, show up not just in stocks but in bonds, currencies and commodities, and because they barely correlate with each other across markets, blending them cross-asset is one of the more durable diversification tricks left.
Trend-following doesn't just work in equities, the same 'winners keep winning for months' pattern shows up, with strikingly similar strength, in commodities, currencies, bonds, and equity indices, which is either powerful diversification evidence or a sign the whole thing is one crowded trade.
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