Why Trend Following Deserves a Defined Role in a Total Portfolio

Jonathan Poyer
19 hours ago
2 min read

Most portfolio debates still start with the same question: What will outperform next?But advisors building portfolios for real clients know the better question is: What role does each allocation play when markets don’t behave as expected?

Rather than viewing portfolios as a collection of competing assets, use a Total Portfolio framework that treats the portfolio as a single system—where each component is evaluated by how it contributes to overall outcomes, especially during periods of stress.

This is where systematic trend following earns its place.

Trend strategies are often misunderstood as return-seeking alternatives or tactical overlays. In reality, their value shows up most clearly when traditional relationships break down—when equity and fixed income correlations rise and diversification fails precisely when it’s needed most.

From a portfolio construction perspective, trend following plays a distinct role:

It is designed to adapt to sustained market moves across asset classes
It historically has shown the ability to respond positively during extended equity drawdowns
And most importantly, it addresses behavioral risk—helping clients stay invested when emotions run highest

This doesn’t mean trend strategies avoid losses or replace core holdings. In a Total Portfolio context, they are better understood as a risk management and diversification sleeve, evaluated by their impact on drawdowns, volatility, and client decision-making—not by how they perform in isolation during bull markets.

For advisors, this reframing matters.

Clients don’t abandon plans because portfolios lag benchmarks in strong markets. They abandon plans after sharp drawdowns, when uncertainty is high and confidence is low. Allocations that can help smooth those experiences—without requiring discretionary timing calls—can meaningfully improve long-term outcomes.

The emphasis should be roles over labels.