The October undercurrents tested the Alpha multi-asset portfolios, revealing how a calendar dense with policy developments and geopolitical headwinds can unsettle even a rules-based system designed to protect against losses. Our Alpha Tactical Asset Allocation (TAA) framework operates on protective momentum, a regime that emphasizes discipline and risk controls over chasing short-term swings. As we approached October, we acknowledged a looming fiscal event in the United Kingdom—the budget from Chancellor Rachel Reeves—and the volatile atmosphere created by a high-stakes U.S. election cycle. Even so, the model’s mandate remained unchanged: follow the rules, measure performance over longer horizons, and resist overreacting to monthly noise. The reality of October, however, was that bad months do happen, and this one certainly did in the context of a broad risk-off environment for certain asset classes. The overarching narrative was a pullback in global equities, a drag from longer-dated gilts as yields rose, and a broader dispersion in regional performance that highlighted the strengths and weaknesses within our diversified framework.
Within markets, the move into October saw developed stock market benchmarks retreat, with the MSCI World Index, which has significant exposure to U.S. mega-cap technology, slipping by 1.96% for the month. The U.K. equity landscape followed a similar trajectory, with the FTSE 100 index retreating by 1.45%. This relative underperformance of broad developed markets placed a spotlight on sector and regional dispersion, a core characteristic our momentum-based approach navigates through its multi-timeframe suite. A more pronounced weakness appeared in emerging markets, where the month’s return was a negative 4.3% in our EM positioning. This underperformance is notably volatile, in part because of China’s market dynamics, which account for roughly 28% of the MSCI Emerging Markets index, and because sentiment towards valuation risk remains sensitive in pockets like Taiwan and India—each of these regions contributing significant weight to the index and reacting to policy cues and appetite for stimulus.
In this context, the Alpha Alpha IC strategies, when viewed through our TAA lens, carried a cautious but purposeful trajectory. The framework’s protective momentum is designed to shield against the most damaging drawdowns by gracefully adjusting exposures in response to evolving momentum signals. October’s moves illustrate the difficult balance between preserving capital and maintaining a meaningful growth tilt in a period characterized by policy uncertainty and shifting rate expectations. The momentum signals did not align with a broad market rally, and as such, the portfolios did not resist some erosion in market returns. Yet, the core design remains intact: the model uses a blend of momentum signals across multiple timeframes, seeking to compound gains when trends are favorable while dampening losses when the trend weakens. The overarching rationale for sticking with this approach is that while individual factors such as sector rotations and country-specific cycles can generate temporary drawdowns, the system’s long-run protective stance is intended to deliver more resilience across the most severe market conditions.
In October, the emphasis on developed market equities as a core element in the strategic allocation remained evident, even as the weakness in EMs and the performance of gilts reshaped risk allocation. The performance gap between global benchmarks and some of our regional allocations reflected both relative momentum shifts and the influence of macro variables connected to U.K. fiscal policy and U.S. election dynamics. The market’s reaction to these events underscores why the model prioritizes trend sensitivity to avoid being static in a rapidly changing environment. The tactical posture remained anchored in the belief that a disciplined exposure to momentum across time horizons can mitigate drawdowns while preserving the capacity to participate when cycles turn favorable. The October backdrop thus reinforced the value of protecting against outsized losses, even when that comes at the cost of temporarily lagging some market indices.
As we interpret the October results, it is important to anchor the discussion in the broader risk environment and the structural considerations of our vehicle mix. The emerging markets weakness was a notable factor, particularly given that it was the single largest contributor to relative drawdown within the portfolio during the month. The -4.3% showing in EM positions stands in contrast to the more moderate declines in other regional exposures, and it highlights the sensitivity of EMs to a confluence of factors: geopolitical risk, policy signals from major economies, and the tug of currency movements in a risk-off backdrop. The EM segment’s reaction to Chinese stimulus measures, while supportive of longer-term growth prospects, produced volatility in the short term as investors recalibrated expectations around the potency and duration of policy support. This dynamic is a reminder that while stimulus can be supportive on a cycle basis, the distribution and timing of that support matter profoundly for momentum-driven strategies that depend on clear, persistent directional signals.
Within our portfolio construction, the persistent challenge remains the balancing act between long-duration exposures and the capital-preserving features of the TAA framework. The longer-dated gilts, especially those with extended maturities, faced headwinds as yields rallied on expectations of inflation persistence and central bank normalization. In October, this dynamic manifested as a drag on the U.K. segment of the TAA, contributing to overall pressure on returns from fixed income components of the portfolio. The relationship between gilts and global risk sentiment is nuanced: while gilts are typically a ballast in risk-off periods, their performance here reflected a sensitivity to shifting rate expectations and the repricing of duration risk. This is a fundamental tension for a momentum-based framework that aims to dilute losses during market crashes while remaining adaptable enough to capture meaningful recoveries when conditions improve.
Another key thread in October’s narrative was the interplay between the U.K. political-economic environment and global capital markets. The UK budget and policy trajectory can influence the cost of capital and the relative attractiveness of domestic equities versus international exposures. The momentum framework, by design, evaluates the fit of different regional and asset-class exposures against prevailing and anticipated trend signals. The October outcome suggested that, while some exposures performed within expectations, others—particularly those tied to longer gilt durations and EM equities—captured less favorable momentum. The shift in performance across these groups reinforced the need to maintain a disciplined approach to rebalancing, ensuring that the TAA framework continues to prioritize downside protection in environments characterized by elevated policy uncertainty, potential tax changes, and macroeconomic risk premia.
In closing this October snapshot, the results underscore three core takeaways for the Alpha TAA approach. First, a rules-based, protective momentum framework can weather a policy- and sentiment-driven storm by avoiding ad hoc reaction to month-to-month volatility. Second, the relative performance of asset classes—especially the drag from longer gilts and the weak showing of EMs—highlights the benefits of maintaining diversified, multi-timeframe momentum signals that can identify shifts in regime and reweight exposures accordingly. Third, the October experience reinforces the importance of a thoughtful rebalancing plan that accommodates macro developments and remains faithful to the system’s risk controls, even when the short-term noise tempts a more aggressive stance. As we transition into November, these lessons guide our ongoing evaluation of risk, allocations, and strategic positioning within the TAA framework.
October 2024: Market backdrop, momentum rules, and the tactical asset allocation framework
October unfolded as a testing ground for the Alpha multi-asset approach, with the calendar featuring a UK budget event and a high-stakes U.S. election backdrop that kept volatility elevated. Our tactical asset allocation (TAA) model operates on protective momentum, a structured, rules-based method designed to minimize downside while exposing the portfolio to opportunities when trends align with the model’s multi-horizon signals. The month’s macro environment reinforced the tension between policy expectations and market pricing, as gilts—particularly those with longer maturities—suffered as yields backed away from prior lows, reflecting concerns about inflation and the path of central rates. In both the U.K. and globally, the policy landscape remained fluid, with investors parsing fiscal policy intentions, taxation, and the potential impact on capital costs, corporate profits, and growth trajectories.
The performance backdrop for October showed developed market equities under pressure, with the MSCI World index posting a decline close to two percent for the month. The U.K. market also gave back ground, as the FTSE 100 fell modestly, illustrating the nuanced regional dynamics that characterize a global risk-off tone. The divergence across regions became most acute in emerging markets, where a more pronounced drawdown underscored the volatility inherent in markets sensitive to policy surprises, capital flows, and commodity price shocks. The EM retreat—recorded at roughly -4.3% in our EM exposure—reflected both the intrinsic volatility of these markets and a concentration of risk in economies with higher sensitivity to global risk appetite and stimulus expectations. Chinese stimulus packages, while potentially supportive in the medium term, added another layer of uncertainty for near-term performance as investors weighed the timing and magnitude of policy support.
From a portfolio-design perspective, October highlighted the strengths and limitations of momentum-based risk control. The protective nature of the momentum rule set helped to dampen deeper drawdowns than could occur with a less disciplined approach, but the month also underscored that even robust rules can register negative performance when broad asset classes move in concert against prevailing sentiment and policy expectations. The TAA system’s reliance on a blend of momentum indicators across multiple horizons is intended to reduce the risk of whipsaws and mis-timed entries, even as individual positions might experience short-term weakness. In this context, the long-duration gilt exposure and the EM allocation were among the most challenged components of the portfolio, reinforcing the importance of continuous risk assessment and disciplined rebalancing in line with the system’s flow-based signals.
The positioning and reweighting that followed October’s results were driven by the model’s ongoing emphasis on downside protection and the evolving momentum signals across timeframes. The decision to prune or adjust exposures is not a reaction to a single month’s outcome but rather an assessment of the regime the system projects for the near to intermediate term. In practice, this means that even when the broader market environment yields negative returns, the TAA framework remains dedicated to preserving capital by damping exposure to the most overextended or high-risk assets, while favoring exposures where momentum confirms a more durable trend. The October outcomes, therefore, served as a practical reminder that the strength of a momentum-based system lies in its ability to systematically adapt to shifting regimes, rather than in producing consistent single-month gains.
The specific headline numbers for October emphasize the scale and direction of movement across the main asset classes. The MSCI World Index, which captures broad global developed equities, declined by nearly two percent for the month, reflecting the market’s sensitivity to U.S. technology leadership and the broader risk-off environment. The UK equities representation, via the FTSE 100, also retreated, with a negative return that underscored how domestic market composition can diverge from global patterns in the wake of policy and macro news. Emerging markets, by contrast, bore the brunt of the drawdown, with the most pronounced weakness among our holdings, driven by volatility in China, repositioning of stimulus expectations, and shifts in risk sentiment toward higher perceived risk in the near term.
The October environment also reminded us that index composition matters greatly when assessing momentum signals. The EM exposure’s weakness was not merely a function of macro weakness but also of the index’s composition—the heavy reliance on China and the exposure to Taiwan and India’s market weights, which together shaped the overall performance profile of the EM sleeve. The system’s approach to maintaining momentum exposure in a volatile environment, while critical to participating in longer-term uptrends, requires steadfast discipline and a readiness to rebalance in ways that align with multi-horizon signals. The dynamic between a persistent risk-off tone and a momentum-driven portfolio is a delicate balance, demanding ongoing scrutiny of correlations, cross-asset interactions, and the evolving policy backdrop.
In summary, October’s performance reinforced several core themes of the Alpha framework. First, the protective momentum approach tends to weather episodic shocks by maintaining a disciplined risk posture, even when disappointments accumulate in the short run. Second, a broad-based equity exposure (the MSCI World) can experience meaningful pressure in a risk-off phase, particularly when U.S. mega-cap tech leadership faces rotation headwinds or valuation concerns intensify. Third, the EM segment’s vulnerability underlines the importance of diversity within the global equity sleeve, while also illustrating that a momentum framework with multi-horizon signals can still preserve a credible long-term position in markets that are structurally volatile. Finally, the October experience underscored the critical role of rebalancing in response to regime shifts, confirming that the TAA model’s value lies not just in its constituent signal inputs but in its ability to translate those signals into coherent, disciplined portfolio adjustments. The lesson going into November is clear: align risk exposures with evolving momentum signals, respect the protective nature of the framework, and remain attentive to macro developments that can alter the return profile of key asset classes.
November 2024: portfolio dynamics, weightings, and strategic shifts
November brought a renewed emphasis on the strategic rebalancing of the Alpha TAA framework, with the goal of preserving capital through protection against downside while positioning for potential regime shifts that could emerge as macro and policy narratives evolve. The month featured a recalibration across multiple asset classes, reflecting both the continuing caution surrounding interest-rate trajectories and the relative performance dispersion that followed October’s outcomes. The central question for the month was whether the momentum signals would align with a more constructive backdrop in some regions or whether the risk-off tone would persist in a way that required additional defensive posture. In this context, the November moves were designed to rebalance the portfolio toward exposures with stronger momentum signals while reducing or rotating away from positions that did not exhibit robust trend-following characteristics.
From a macro perspective, the month’s narrative hinged on currency considerations, central bank policy expectations, and the evolving fiscal outlook in the U.K. and other major economies. The dollar’s potential role as a haven, in light of global policy uncertainties, was a recurring theme, while the role of U.S. and U.K. rates, inflation expectations, and the path to rate normalization remained central to the risk-reward calculus of the TAA framework. The interplay between currency dynamics and asset class momentum underscored the importance of cross-asset correlations in maintaining portfolio resilience. As policy signals and growth expectations shifted, the TAA framework evaluated sectoral and regional exposures through the lens of momentum across different horizons, ensuring that positions with a constructive trend remained weight-bearing while weaker signals were attenuated or rotated.
In October, the biggest momentum drag emerged from the long-duration gilts and the emerging markets exposure, as discussed earlier. While these positions faced headwinds, the November read of momentum signals for these areas required careful scrutiny—particularly given the potential for a policy inflection or shift in regime that could alter the relative attractiveness of these exposures. The framework’s multi-timeframe momentum approach seeks to mitigate the risk of abrupt, one-off reversals by distributing exposures across time horizons and by embedding a layer of trend verification that helps prevent premature exits or entries in the face of transient fluctuations. The November adjustments thus reflect the ongoing balance between risk control and the pursuit of return opportunity within a disciplined, rules-based architecture.
The November slate of weights across different risk profiles offers a detailed snapshot of where the system positioned the portfolio in light of evolving momentum signals. The stated weightings illustrate a structured allocation to cash, gilts, UK corporate debt, inflation-linked securities, investment-grade (IG) and high-yield (HY) corporate credit, as well as global equity exposure through MSCI World, and regional tilts to MSCI Japan and MSCI Emerging Markets. In practice, November’s weightings show a tilt toward higher-risk assets in more aggressive profiles (as expected in a rising-momentum regime) while maintaining a level of ballast for the cautious and more risk-averse sleeves. The data indicate a recalibration of the fixed income and equity components to reflect the shifting momentum across timeframes, with a relative overweight to U.S. Tips (inflation-protected securities) in several risk bands, and a strategic emphasis on global equities like MSCI World compared to more volatile EM exposures.
The detailed November asset weightings reveal how the TAA system positions its diversified mandate across categories and geographies. For the risk-aware profiles, the allocation to cash remains a smaller percentage, while exposure to duration-managed gilts and corporate debt fluctuates according to the momentum signals. The US Tips component is particularly notable for its magnitude, reflecting the model’s belief in the protective properties of inflation-linkers within the current policy environment, where expectations of rate cuts or the timing of rate normalization could influence the relative attractiveness of inflation-protected strategies. The credit sleeve—consisting of UK Corporate, IG Corporate, and HY Corporate—continues to provide a balance of yield and risk, with weights moderated to reflect prevailing momentum and the risk premium embedded in corporate credit spreads.
In terms of equities, the global exposure represented by MSCI World remains a core anchor across risk bands, though the allocation to Japan and Emerging Markets demonstrates a measured tilt toward regions where momentum signals showed resilience or potential for reversal. The FTSE 250 and UK domestic exposure component remains a consideration in the more UK-centric portions of the portfolio, reflecting the potential for mid-cap exposure to display different momentum characteristics relative to the broader global equities universe. Gold and other hedges remain present as diversifiers, with a staggered allocation designed to complement the overall risk profile across the four strategic sleeves. The November mix, with its multi-pronged approach to equities, fixed income, and hedges, showcases how the TAA framework translates the month’s momentum signals into a structured, risk-controlled allocation that seeks to preserve capital while maintaining a pathway to upside capture as regimes evolve.
Beyond the raw weights, another nuanced feature of the November iteration is the implicit acknowledgement of the costs associated with dynamic trading in a momentum-driven system. The number of trades required to adjust from October to November includes multiple sells and buys across different asset classes, reflecting the framework’s responsiveness to shifting momentum. The sequencing and timing of these trades are designed to minimize turnover drag while ensuring that the portfolio remains aligned with the prevailing regime. The October-to-November transition thus illustrates the practical operation of the TAA model: a disciplined process of repositioning to reflect updated momentum signals, balanced against the real-world frictions of trading costs and the need to avoid excessive churn. This operational reality reinforces the value of a robust rules-based approach, wherein disciplined execution can be as important as the signals themselves for preserving capital and achieving the desired risk-adjusted outcomes.
Overall, November’s stated weights and the portfolio’s configuration emphasize the protection-first ethos of the Alpha TAA approach, while still granting room for exposure to asset classes and regions with favorable momentum signals. The weight allocations—especially the significant emphasis on U.S. Tips, the MSCI World exposure, and the strategic positioning in currencies and possibly currency-hedged components—reflect a careful balance between defensive positioning and the pursuit of growth opportunities in a regime that is still being run through a lens of volatility and policy uncertainty. As always, the framework’s multi-horizon momentum design remains central to evaluating whether the current mix continues to meet the protective objectives while also offering a path to capital appreciation should regime dynamics shift favorably. The November update thus embodies the ongoing, dynamic nature of the TAA process: disciplined risk management combined with opportunistic positioning driven by momentum signals across timeframes and asset classes.
November 2024 high-level asset allocation and the rationale
The November 2024 reset brings into focus the explicit high-level asset allocation framework that underpins the TAA decision-making process, translating momentum signals into a structured blueprint for risk control and growth potential. The emphasis remains on a diversified mix that can adapt to evolving market regimes, ensuring that the portfolio remains resilient during periods of heightened volatility while retaining the capacity to participate in favorable trends when they materialize. The high-level asset allocation for November underscores several key features: a continued emphasis on cash equivalents as a liquidity cushion for downside protection, a robust allocation to inflation-linked U.S. Treasuries (Tips) to hedge against inflation and provide a cushion during uncertain rate trajectories, a diversified approach to fixed income across gilts chasing the duration-risk profile, and a strategic allocation to global equities anchored by MSCI World. The weighting approach also signals a deliberate tilt toward regions and sectors with momentum signals that align with the framework’s multi-timeframe methodology, including Japan and emerging markets, while maintaining a steady exposure to UK equities where momentum remains supportive.
The weightings table for November shows that cash is maintained at a meaningful level to preserve optionality, particularly for risk-managed sleeves where capital protection remains paramount. Gilts 0-5 years receive a notable allocation, reflecting a balance between yield and safety, while longer-dated gilts—combined with index-linked gilts—are managed carefully in the context of rising yields and potential duration risk. UK corporate debt is allocated progressively to reflect the risk-reward trade-off as momentum signals guide exposure to credit risk within a domestic context. The U.S. dollar-denominated tips remain a central pillar given their role in dampening inflation risk within the portfolio, with other dollar-denominated credit exposures (IG and HY) providing additional yield and diversification, albeit with recognized sensitivity to credit cycles and macro sentiment.
Global equities remain a cornerstone of the portfolio for November, with the MSCI World index representing a core exposure for most risk profiles, illustrating the system’s conviction that developed-market equities continue to offer a durable growth anchor in a diverse risk framework. The allocation to MSCI Japan, as well as MSCI Emerging Markets, highlights the nuanced view of regional momentum: Japan’s contribution is supported by momentum signals that have held up in October, while emerging markets present a more complex mix, requiring careful monitoring of China policy trajectories and the broader risk sentiment affecting Asia-Pacific equities. The inclusion of FTSE 250 within the domestic exposure spectrum remains notable, representing the tilt toward UK mid-caps within the global share allocation. Gold, as a traditional hedging instrument, is included across profiles to help diversify away from equity and rate risk and to offer a store of value that can perform differently from risk assets in times of market stress or regime change.
The November asset-weights table, with its four risk profiles—Cautious, Balanced, Moderate Risk, and Adventurous—lays out precise allocations across these asset classes. Within each profile, the relative weight to U.S. Tips tends to be high, reflecting the model’s emphasis on inflation protection and its role in stabilizing portfolios during periods of rate uncertainty or inflation surprises. The weight to MSCI World remains substantial across risk bands, underscoring the framework’s reliance on developed-market equities as a core growth driver. The allocation to MSCI Japan and MSCI Emerging Markets shifts across risk profiles, revealing a calibrated stance that accepts higher exposure in more aggressive sleeves where momentum signals justify a heavier tilt toward higher-volatility growth opportunities. The UK-centric exposure via FTSE 250, while consistently present across risk levels, is sized to reflect the strategic intent to balance domestic growth potential with global diversification.
The November 2024 high-level asset allocation also reveals the evolving role of cash and short-duration instruments within the TAA framework. The cash allocation is adjusted to preserve liquidity and to ensure that the portfolio can act on new momentum signals without triggering outsized trading costs. The gilts allocation is designed to balance duration risk with the desire for modest income, while the credit sleeve (IG and HY) contributes to yield while taking on credit risk commensurate with momentum signals and risk appetite. The combination of these elements demonstrates how momentum-based TAA translates macro and policy signals into a coherent set of exposures that reflect the current regime, while still maintaining flexibility to pivot toward alternative exposures when new momentum cues emerge.
In practice, the November rebalancing also involved a careful consideration of the number of trades necessary to adjust the portfolio across the four risk profiles. The TAA framework has a defined set of trades needed to shift from October to November, including a sequence of sells and buys that reposition positions to align with updated momentum readings. This disciplined trading plan is essential to minimizing turnover costs and slippage, ensuring that the performance impact of changes in exposures remains within expected bounds given the framework’s risk-management objectives. The process demonstrates how the TAA system translates momentum signals into actionable trading activity with a focus on risk-adjusted return rather than purely directional bets. The November 2024 iteration thus reflects a mature articulation of the framework’s approach to risk control and opportunity capture, aligned with ongoing macro assessment and regime analysis.
November 2024: asset mix in detail, risk considerations, and regime analysis
A careful examination of the detailed November mix reveals a macro-informed, momentum-driven approach to asset allocation, with explicit emphasis on hedges, diversification, and conditional risk-taking. The allocation spread is designed to keep downside protection robust while still enabling the portfolios to participate meaningfully in any regime that shows persistent directional momentum. The allocation to cash remains a fundamental aspect of risk management, providing liquidity and optionality that are particularly valuable when momentum signals suggest potential regime shifts or heightened volatility. Similarly, the exposure to U.K. gilts and longer-duration bonds is managed to balance yield generation with duration risk, particularly as global rate expectations continue to evolve and inflation expectations shift in response to policy action.
The fixed-income sleeve in November emphasizes U.S. Tips as a central risk-control asset, reflecting the model’s preference for inflation protection in an environment where inflation dynamics and rate trajectories remain a focal point for investors. The credit slice—comprising UK Corporate, IG Corporate, and HY Corporate—continues to contribute to yield and diversification, while the risk profile of HY remains carefully calibrated to align with momentum signals and expected credit performance. The model’s stance on sovereign and corporate credit is shaped by the evolving risk premia embedded in spreads, along with the macro environment’s influence on credit demand and supply dynamics. With the momentum framework, the goal is to avoid overexposure to the most stretched parts of the credit spectrum when signals indicate deteriorating risk conditions, while still maintaining enough exposure to capture the potential upside when momentum favors risk assets.
The equity allocation remains anchored by MSCI World, whose broad exposure to developed markets offers a stable growth anchor and a proxy for global risk appetite. While EMs and Japan contribute to diversification and potential higher growth, the momentum signals around these regions are more nuanced, requiring careful monitoring of policy shifts, currency movement, and domestic growth trajectories. The allocation to Japan, in particular, is shaped by a balance of momentum support for the yen’s potential weakness against the dollar and the possible implications for Japanese earnings and economic policy. In Emerging Markets, momentum remains a key consideration, as the mix reflects an attempt to capture potential recoveries in regions where policy stimulus and improving growth prospects might reassert themselves, even as the domestic political and macro environment remains a source of risk.
Gold continues to be a strategic diversifier within the portfolio, providing a non-yield-bearing hedge that can interact differently with various risk factors than traditional assets. The inclusion of gold within all risk profiles is designed to bolster portfolio resilience and offer a form of insurance against regime shifts or sudden risk-aversion spikes. The diversification benefits of gold, alongside currency exposure considerations, contribute to the broader objective of reducing correlation risk across the portfolio and preserving capital during periods of structural market disruption. The November configuration thus features a layered, multi-asset approach that remains faithful to the TAA framework’s core objective: to dampen losses during significant market downturns while preserving the ability to participate in sustained upward trends should momentum readings turn favorable.
Risks and limitations of momentum-based TAA
No investment approach is without its caveats, and the momentum-based TAA framework is no exception. One valid criticism is that, in times of extended meandering uncertainty, the model can oscillate between satellite positions, trading in and out of exposures that may underperform during periods of pullbacks or miss rallies when momentum reverses suddenly. While the multi-timeframe nature of the system is designed to attenuate such risks by providing a more robust composite signal, there remains a possibility of being bounced out of positions at inopportune moments and then missing subsequent rebounds. In practice, no single signal is perfect, and a diversified, rules-based approach to momentum can still experience whipsaw under certain conditions. The key defense against this outcome lies in the structure of the model: a mix of momentum indicators across multiple horizons, coupled with risk controls and a disciplined rebalancing calendar designed to prevent over-trading.
Another consideration is the potential for regime shifts to diminish the effectiveness of historical momentum patterns. When the macro environment undergoes a fundamental change—such as a sustained acceleration in growth, structural changes in inflation dynamics, or a sudden shift in policy stance—the past momentum signal may not be a reliable predictor of future performance. The TAA framework is designed to adapt to such changes, but there is always a risk that the model’s rules could lag behind or misinterpret the new regime, leading to temporary underperformance relative to a more discretionary approach. That said, the backbone of the strategy—protective momentum—aims to reduce the downside risk associated with mis-timed entries and exits, preserving capital during adverse periods and maintaining a disciplined approach to risk management.
The number of trades required to adjust between October and November also highlights practical considerations in implementing a momentum-based strategy. A moderate number of sells and buys and subsequent rebalancing actions across multiple positions means a higher turnover period, incurring costs that can erode performance if not carefully managed. The TAA framework explicitly accounts for these dynamics by calibrating turnover against the expected risk-adjusted return benefits of the momentum-driven repositioning. While trading costs are an inevitable drag on performance, the model’s design seeks to minimize this impact by ensuring that adjustments are only undertaken when momentum signals warrant a change in exposure. This balance between responsiveness and cost discipline is central to the framework’s long-run performance and risk management.
In addition to these mechanical considerations, investors should remain mindful of structural risks associated with the asset classes in which the TAA framework invests. The long-duration gilt exposures, the EM allocations, and the foreign-currency components can be sensitive to cross-market dislocations, policy surprises, and shifts in risk sentiment. Diversification across time horizons, geographies, and asset classes remains the primary antidote to such risk, but it cannot fully eliminate it. The framework’s ongoing development—how it diversifies rules across additional models, how it responds to new signals, and how it integrates alternative sources of risk data—will matter for its ability to stay ahead of regime changes while maintaining protective characteristics.
Overall, the momentum-based TAA approach offers a structured path to risk management and return enhancement through regime-aware, rules-based decisions. The recognized drawbacks—potential whipsaws, the need for disciplined turnover, and sensitivity to regime shifts—underscore the importance of continuous refinement and diversification of the TAA rule set. The ongoing work involves expanding the rules-based system with additional models to prevent overreliance on a single signal, enhancing diversification across signals and timeframes, and integrating a broader set of risk checks to reduce drawdowns further while preserving the capacity to exploit genuine momentum in the markets. This careful evolution is essential, given the complexity of global markets and the persistent influence of policy and macro dynamics on asset prices.
Risks and outlook for Japan and the FTSE 250 positions
Two positions in particular—Japanese equities and the UK FTSE 250 exposure—present clear, palpable risks as we navigate the months ahead. In Japan, October’s equity gains were driven in part by expectations of yen weakness following the latest electoral outcomes. While this price action supported near-term gains, the longer-term implications depend on policy continuity and the potential for the Liberal Democratic Party to maintain its majority. If the market begins to factor in a reduced ability for policymaking, this could be negative for shares, particularly if the Bank of Japan’s normalization path proceeds in a manner that alters interest rate expectations or the currency implications of higher rates. The TAA framework will be watching these dynamics carefully, because a shift in Japanese policy expectations could alter the momentum signals that currently support exposure to MSCI Japan.
For the UK market, the FTSE 100’s momentum ranking relative to other global indices has the potential to weaken the case for large-cap UK exposure, especially as the portfolio’s global shares axis is reassessed in light of regime shifts. The shift away from the FTSE 100 in favor of the UK mid-cap space, represented by the FTSE 250, reflects a structural preference within the TAA framework for regions and segments that show stronger momentum signals over multiple horizons. However, this tilt is not without risk. The UK mid-cap market’s performance can be more cyclical and sensitive to domestic policy shifts, cost of capital dynamics, and tax regimes, all of which can influence growth expectations for mid-sized firms. If the policy path in the UK leads to higher taxation, tighter financial conditions, or a deterioration in the investment climate, mid-cap equities could face headwinds even if broader global momentum improves.
The overarching implication is that positions in Japan and FTSE 250—while justified by momentum signals in the current regime—require careful attention to evolving macro and policy developments. The momentum framework’s strength lies in dynamic reallocation in line with regime shifts, but long-term positioning in these areas must be tempered by expectations about the durability of the signals and the broader environment’s trajectory. The framework’s standard practice is to monitor regime indicators closely and to adjust exposures as momentum evolves, ensuring that risk management remains at the forefront of decision-making. The current stance is not a static bet; it is a dynamic posture contingent on the unfolding momentum across time horizons and the changing macro backdrop that conditions market behavior.
November 2024: currency, credit, and rate dynamics shaping the portfolio
Currency is a prominent theme in the November reset, with consideration of how the currency backdrop interacts with the performance of bond and equity positions. The U.S. dollar’s role as a possible haven for UK investors persists, particularly given the relative strength of the rate-cut narrative in the Bank of England and the Federal Reserve. The expectation that both central banks could ease policy in the near term, even as inflation dynamics remain a risk factor, has implications for the dollar’s role in our portfolio. A stronger dollar tends to weigh on non-dollar returns for some asset classes but can provide diversification benefits as a hedge against domestic risk. This currency perspective is interwoven with the TAA framework’s broader objective of risk diversification, as currency movements can alter the real return profile for international exposures and, in turn, affect momentum signals in ways that require continuous monitoring.
The credit markets—the UK corporate, IG, and HY spaces—have faced a confluence of factors that influence momentum signals. Sterling-denominated corporate credit has been affected by a rally in sovereign yields, as investors demand higher compensation for the inflationary risk of state spending and the possibility of interest-rate normalization. Although this environment has lowered the absolute level of relative returns on sterling credit, the multi-time-period momentum trend remains favorable overall. The momentum approach suggests that even if spreads are not narrowing, the currency dynamics and total return considerations may still deliver a favorable risk-adjusted outcome when measured across the specified momentum horizons. The U.S. dollar-denominated credit positions, including IG and HY, have benefited from a shift in fears of a U.S. recession and a demand dynamic that has stressed the supply side, as companies attempt to optimize balance sheets in an environment of shifting capital costs. Yet, the model remains mindful of the risk that this dynamic could reverse if growth slows more than anticipated or if credit spreads compress in an environment of renewed risk appetite.
From a risk-management standpoint, the November month emphasizes the need to maintain a balanced exposure to U.S. Tips and to monitor growth-sensitive equities alongside the more defensive components of the portfolio. The protective objective remains central amidst a backdrop of potential policy shifts, currency volatility, and evolving rate expectations. The framework’s ongoing evaluation continues to focus on maintaining the right balance between yield, inflation hedging, and capital preservation. In doing so, the TAA framework seeks to deliver a robust expected return while minimizing downside risk, recognizing that the regime could shift in ways that either extend or limit the duration benefits of our gilt exposures and the relative performance of the EM and Japan allocations. Overall, the November configuration underscores a cautious, risk-aware posture that remains prepared to adjust as momentum signals evolve and as macro dynamics unfold. The objective remains constant: protect capital while maintaining exposure to assets with favorable momentum signals across multiple horizons.
November 2024: weightings, prior allocations, and tactical shifts
In November, the TAA framework sets out a precise mapping of asset weights across four risk profiles—Cautious, Balanced, Moderate Risk, and Adventurous—reflecting the system’s ongoing effort to balance downside protection with opportunities for upside in line with momentum signals. The weightings reveal how capital is allocated across cash, gilts, UK Corporate, US Tips, IG and HY credit, MSCI World, MSCI Japan, MSCI Emerging Markets, FTSE 250, and Gold. The weight table shows the relative emphasis placed on each asset class within the four risk bands, highlighting the strategic tilt toward inflation-protected assets and global equities in more aggressive portfolios, while preserving a cash and short-duration bond allocation to safeguard liquidity and downside protection in more conservative profiles.
The table for November presents the following allocations, expressed as percentages by risk profile:
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Cash 3 months: Cautious 8.0%, Balanced 2.5%, Moderate 2.5%, Adventurous 2.5%.
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Gilts 0-5 years: Cautious 4.0%, Balanced 1.3%, Moderate 1.3%, Adventurous 1.3%.
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UK Corporate: Cautious 8.4%, Balanced 5.8%, Moderate 4.9%, Adventurous 3.4%.
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USD Tips: Cautious 21.9%, Balanced 22.5%, Moderate 18.1%, Adventurous 10.6%.
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IG Corporate: Cautious 4.4%, Balanced 4.5%, Moderate 3.6%, Adventurous 2.1%.
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HY Corporate: Cautious 4.4%, Balanced 4.5%, Moderate 3.6%, Adventurous 2.1%.
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MSCI World: Cautious 28.6%, Balanced 35.9%, Moderate 41.1%, Adventurous 49.9%.
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MSCI Japan: Cautious 5.2%, Balanced 6.5%, Moderate 7.5%, Adventurous 9.1%.
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MSCI Emerging Markets: Cautious 5.2%, Balanced 6.5%, Moderate 7.5%, Adventurous 9.1%.
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FTSE 250: Cautious 5.0%, Balanced 5.0%, Moderate 5.0%, Adventurous 5.0%.
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Gold: Cautious 5.0%, Balanced 5.0%, Moderate 5.0%, Adventurous 5.0%.
Source: Investors’ Chronicle, LSEG.
The November 2024 weightings reveal a disciplined tilt toward inflation-hedged assets and global equities while maintaining a cushion of cash and shorter-duration instruments to preserve optionality. U.S. Tips occupy a substantial share of the portfolio across risk bands, reflecting the framework’s preference for inflation protection amid uncertain rate trajectories. Meanwhile, the MSCI World exposure remains a central anchor, reinforcing the framework’s view that developed-market equities offer a steady growth component within a diversified risk framework. The Japan and Emerging Markets exposures gradually scale with risk tolerance, illustrating the framework’s willingness to adjust regional tilt based on momentum signals across horizons. The consistent 5.0% allocation to FTSE 250 across risk profiles signals a long-standing belief in the UK mid-cap space as a reliable source of domestic growth and diversification, while gold serves as a steady diversifier across the risk spectrum.
The November allocation also highlights the practical considerations around turnover costs and trading frequencies. The TAA framework requires a non-trivial number of trades to adjust between October and November, including four sells and five buys for several assets and additional reallocation across five positions. This cadence reflects the framework’s commitment to maintaining alignment with momentum signals while optimizing the timing and sequencing of trades to minimize slippage and turnover costs. While the turnover incurs costs, the disciplined approach is designed to maximize net risk-adjusted returns by ensuring that exposure to favorable momentum regimes is preserved and that defensive postures are reinforced in regimes characterized by elevated risk. The November rebalancing thus embodies the dynamic, disciplined approach that underpins the TAA framework: a careful combination of signal-driven adjustments, cost-conscious execution, and a diversified asset mix designed to withstand evolving macro conditions.
Conclusion
The October and November 2024 sequence for the Alpha multi-asset portfolios underscores the ongoing discipline of a rules-based, momentum-driven framework. October’s macro backdrop—domestic policy uncertainty in the U.K., coupled with a global risk-off tone and EM volatility—tested the durability of protective momentum signals and highlighted the importance of a well-diversified, time-horizon-aware asset mix. The November rebalancing reinforced the framework’s core principles: maintain downside protection while preserving the ability to participate in regimes where momentum signals remain favorable, adjust exposures across multiple horizons, and manage turnover efficiently to control costs. The observed performance patterns—weakness in longer gilts and EMs, relative resilience in global developed markets, and a strategic tilt toward U.S. tips, MSCI World, and selective regional exposures—illustrate how the TAA approach translates macro signals into a structured, risk-aware allocation that can adapt to evolving policy and market dynamics.
Looking ahead, the framework remains committed to refining diversification across models and signals to better absorb regime shifts and to further reduce drawdowns during severe market episodes. The continuous development of rules-based TAA across more models aims to balance the protective essence of momentum—its power to dilute losses in crashes—with an expanded toolkit that can capture new momentum regimes when they emerge. The November 2024 configuration reflects both a disciplined adherence to that philosophy and an acknowledgement that markets evolve; the goal is to sustain robust risk-adjusted returns through disciplined risk management, thoughtful diversification, and a disciplined, evidence-based approach to momentum signals across time horizons. As always, the performance journey is an ongoing process of observation, analysis, and disciplined execution designed to navigate the complexities of global markets while preserving capital and seeking opportunity in a structured, systematic way.