Why Managed Futures Are Well Positioned in 2024

This year continues to follow in the footsteps of 2023, marked by increased investor optimism but ongoing uncertainty. For now, much remains unknown, and a higher January inflation print only proves the challenges that still lie ahead. Managed futures strategies are worth consideration in such an environment for their strong diversification potential and ability to capitalize on asset class gains and losses.

Managed futures take long or short positions on a range of asset classes via the futures market. As 2024 continues to unfold in unpredictable ways, these strategies are uniquely qualified to adapt and take advantage of potential dislocations, outperformance, and underperformance of asset classes.

“Markets tend to move aggressively when things don’t turn out as expected and Managed Futures can be framed as exposure to this uncertainty,” the authors of the KFA Funds 2024 Managed Futures Outlook wrote.

Equity Outlook and Managed Futures

Equities entered 2024 trading at sizable multiples. The S&P 500 ended 2023 with an estimated 22 price-to-earnings ratio. Forecasts for 2024 put the S&P 500 forward PE around 20 with markets priced for ambitious rate cuts.

“Stocks are not cheap right now and priced for a smooth, soft landing,” the authors wrote.

Chart of forecasts of output growth with probability data for December 2024.

Image source: The New York Fed