Is this the bottom for the Dollar – Month in Review: August 2020
Macroeconomic Environment Review
Just like the two months that came before it, August was yet another bullish month for the global equity markets, with the benchmark S&P 500 returning approximately 7%. I realize that I have mentioned this a few times already by now, but it still remains the key theme of the year: monetary easing from the major central banks and a broadly supportive stance from policymakers around the world have allowed equities to run to fresh highs. Is that sustainable though? Well, that’s another question and even though we’re discussing August’s price action here, I can’t fail but make a reference to the sharp correction during the early days of September – so equity traders, be warned…
Across the currencies’ universe, the anti-Dollar rally we’ve been seeing during the past few months seems to be easing out, if not stopping. In line with our comments in our previous monthly note, exhaustion seems to be developing in the rest of the major currencies’ rallies. The Euro may have hit 1.20 briefly but reversed course and settled around 1.18 at the end of August and recent chatter about the ECB taking a stronger verb stance to “talk down” the currency may lead to a deeper correction.
In similar fashion, Sterling hit 1.35 but during the early September sessions prices have dropped below 1.32. Across the rest of the majors’ board, the US Dollar has been attempting to pare its losses from earlier in the year and, even though we don’t anticipate a complete reversal of the bear trend for the greenback, we should be prepared for further choppy and directionless price action as we draw closer to the key US elections event.
Finally from a tactical perspective, what I mentioned last month remains exceptionally relevant and I must again stress the need for flexible positioning and focus on the short-term horizon: “…Momentum will be likely replaced by Mean Reversal and Breakout as the go-to factors to seek alpha over the coming few weeks, which means that traditional trend-following funds may struggle while alternative asset managers should have an easier time navigating these waters”.
Portfolio & Programs’ Review
During the month of August 2020, AENAON Syncro Algo generated a Total Return of -1.97% net of fees. Consequently, our year-to-date Total Return for 2020 stands at +16.50% net of fees.
Against most of our benchmark indices, our performance during August was rather lackluster. As a comparison, AENAON Syncro Algo returned -1.97% last month, versus a +7.01% return for the US S&P500 equities index, a +2.46% gain for the Barclay Hedge Fund Index, a +0.29% gain for the Barclay CTA Index, a -0.05% loss for the Currency Traders Index and a 0.03% gain for the Systematic Traders Index.
Since the beginning of the year, our flagship program remains consistently in positive territory, despite the occasional pullback like last month. The small losses during August have taken our performance off their recent peak, but we are optimistic that the rest of 2020 will be equally strong as the previous months. Thus, our end of year target remains in line with our expectations to return a strong risk-adjusted performance for our investors.
In some more upbeat news, our impressive performance during the previous month of July has earned us one more top ranking from BarclayHedge, the industry-standard point of reference for emerging asset managers. Our flagship AENAON Syncro Algo program has ranked number 2 in the Currency Traders Managing Less Than $10M category and number 7 in the Short Term category for July 2020 against our competitors from around the world.
You can always review AENAON Syncro Algo’s updated fact sheet at our Fundpeak link, with monthly performance updates and statistics since inception.
