The Unraveling of the post-GFC Era & What Comes Next

Barry Goodman, co-CEO and Executive Director of Trading, draws on Millburn's long history of trading through various crises to contextualize the events of March 2026 and makes the case for why our multi-strategy product, Alloy, is the firm's most complete expression of an investment process that prioritizes being adaptable and nimble.

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The Unraveling

For more than a decade following the Global Financial Crisis, investors benefitted from low interest rates, suppressed volatility, tight credit spreads, and a geopolitical backdrop largely quiet enough to ignore. As a result, passive strategies flourished, monetary policy seemed to minimize drawdowns, and risk appeared to be something that could be managed by simply staying the course.

The unraveling of this era was gradual and sudden all at once. The COVID-19 pandemic exposed the fragility of global supply chains. The war in Ukraine demonstrated that even in contemporary times, commodities could be weaponized. Sanctions and countersanctions accelerated the formation of new trading blocs and challenged the primacy of the U.S. dollar. Tariffs further reshaped trade flows. And many central banks, having spent years fostering an accommodative policy, found themselves caught between inflation and growth.

March 2026 was the latest expression of this new reality. Following U.S. and Israeli strikes at the end of February, Iran effectively closed the Strait of Hormuz, a passage through which roughly 20% of the world's oil and liquefied natural gas normally transits. Brent crude surged above $100 per barrel. The VIX spiked to its highest level since the tariff-driven volatility in the Spring of 2025. Many major equity indices fell over consecutive weeks. And the disruptions cascaded from energy to inflation expectations, from inflation to rate repricing, from rates to currencies and credit, and from credit to risk appetite across practically every asset class. Each dislocation seemed to amplify the next.

Reflexive Markets

For most of the post-GFC era, economic fundamentals were understood to be the primary driver of asset prices. Investors could study earnings, monitor central bank policy, and position accordingly with reasonable confidence that the relationship between data and prices would generally hold. That confidence bred a set of behaviors that became deeply embedded: financial advisors assured clients that markets always recover; products were structured around the assumption of stable correlations between asset classes; and an entire generation of allocators was trained to treat volatility as a temporary inconvenience rather than a signal.

Those assumptions are now being tested. In our view, what makes this environment different from prior periods of stress is how the shocks interact and how quickly those interactions occur. Perhaps amplified by algorithmic execution and the sheer availability of real-time data, the speed of this cascade can seem to compress what used to take quarters into days. Leading indicators can become laggards. Social media tweets can expose the fragility of entire systems, as they did with the U.S. regional banking crisis in 2023. In short, we may be witnessing what George Soros calls a period of reflexivity, in which volatility and price momentum dictate the fundamental outlook rather than the other way around.

In this new regime, old playbooks may struggle. Static allocations, backward-looking correlations, "buy-the-dip" behavior, and strategies anchored to a single factor or asset class may be exposed as embodying an entirely new level of risk.

We have been writing about this structural shift since 2022, including the ripple effects of commodity disruption across asset classes and the emergence of a VUCA-driven (Volatility, Uncertainty, Complexity and Ambiguity) vortex. A throughline for each of these pieces is our belief that while many market observers have been using the phrase higher for longer to describe how to look at interest rates or inflation, we tend to think of that phrase in terms of volatility.

A Millburn Retrospective

Millburn's legacy dates to 1971, when a small group of partners began trading commodity futures with $20,000 and a set of mathematically based models whose signals were calculated by hand. In the more than five decades since, the firm has traded through virtually every market regime imaginable, with each one shaping how we invest today.

During the Arab Oil Embargo of October 1973, we were trading. When the Plaza Accord was announced in September 1985, triggering an overnight repricing of global currencies, we were trading. When the stock market crashed in October 1987, we were trading. During the Bond Massacre in February 1994, we were trading. And during the Volmageddon shock of February 2018, we were trading. Trading through these environments provided, among other things, the opportunity to learn from stress and adapt our risk and reward frameworks. For example, in the 1980s, Millburn developed what we believe to be one of the earliest forms of volatility-based risk budgeting, a precursor to the value-at-risk frameworks that would later become industry standard.

The pattern of stress, adaptation, and improvement is embedded in Millburn's DNA. It has lent itself to an investment process that has evolved through various crises, market cycles, and regimes. That process begins with economic understanding, based on an assessment of what drives markets, rooted in supply-and-demand dynamics, structural change, monetary policy, and geopolitics. Data is then sourced, tested, and modeled using quantitative techniques designed to learn and adapt as conditions evolve. In production, our systematic process allows the models to be nimble, adjusting positioning at speed and at scale—across thousands of instruments, potentially several times per day—while seeking to avoid the cognitive biases that can make real-time human decision-making in volatile environments so difficult.

In March, that process produced positive contributions across Alloy's Quant Macro, Commodity, Resources, and China Diversified strategies, offsetting a loss in the Cryptocurrency strategy. In a month when many multi-strategy and systematic strategies struggled to navigate the speed and complexity of the dislocations, the breadth of Alloy's opportunity set was advantageous.

Our Most Complete Expression of Our Philosophy

We follow these principles for each strategy we research and trade. However, the Millburn Alloy Program represents the most complete expression of our investment philosophy to date. Alloy seeks to combine Millburn's core capabilities by applying our latest research and risk management techniques across the widest possible array of geographies and markets. Doing so means Alloy integrates the firm's core strategies into a single portfolio, aligning with the principles we believe are essential for navigating the environment now upon us.

Approaches built for simpler times may not be suited for what lies ahead. We believe the lower-for-longer mantra that characterized the post-GFC regime has been replaced by higher-for-longer, represented not by interest rates, but volatility. If we are right, then March was not an anomaly, but rather a preview. 

Millburn has traded through various crises over the last fifty-plus years and treated each as an opportunity to improve our process. We believe Alloy is the most complete expression of our approach in addressing whatever comes next. We look forward to exploring these topics further in the months ahead.