Trends Watch: November 30, 2017

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.  

This week, Elana talks to Donald Wieczorek, President & Founder, Purple Valley Capital, Inc.

What is your outlook for alternatives, or more specifically, CTAs?

Alternatives have had a stretch of poor performance over the past few years as equities and bonds have enjoyed extended bull markets, but I'm confident the tide will turn at some point, as it’s apt to happen in markets. As a result, I'm optimistic about the future of alternatives, especially the CTA space. The benefits of non-correlation, with an ability to potentially do well during crises and recessions, can be a huge benefit to portfolios. While the accommodative Central Bank policies have supported many financial markets and reduced volatility for almost a decade, now that interest rates are slowly beginning to rise, and the Federal Reserve is beginning to unwind their balance sheet starting this month, we may experience some new market trends and increased volatility. This would be a welcome sign for CTAs.

What is your outlook for the economy?

As a CTA who trades a systematic technical trend following program, I am relatively agnostic regarding the outlook of the economy. I react to market prices and follow trends, whether they are up and down. From a personal perspective, I'm thrilled the economy is experiencing positive growth and is adding jobs, but the lack of volatility, length of the equity bull market, and social instability makes me nervous.

What keeps you up at night?

The biggest worry of mine is how markets are going to react to the change in monetary policy that is finally occurring now. Markets of all shapes and sizes (equities, bonds, housing, bitcoins, etc...) have been rising steadily against a backdrop of extraordinarily loose monetary policy that has never been seen before in history. Now that the Fed has raised interest rates a couple of times, and will begin to reverse its quantitative easing starting this month, and other central banks will begin doing the same soon, I'm curious to see how markets react. If you're a believer that easy monetary policy helped avoid a worse recession and have supported asset prices, then I think it's prudent to think that the withdrawing of such liquidity may reverse some of its effects. Only time will tell.