More easing, fresh highs? Month in Review: June 2020
Macroeconomic Environment Review
June was a positive month for the global money markets in general following the major central banks’ commitment to stimulate their domestic economies with aggressive monetary policy actions. Leading the pack, the US Federal Reserve made it clear that they’re prepared to continue decreasing interest rates to encourage the economic recovery following the Coronavirus-related drop in demand. According to the Fed Fund Futures, the markets expect two key interest rate cuts this year – potentially during the months of July and October – while the European Central Bank, the Bank of England and the Bank of Japan also sent similar dovish signals during their recent communications.
This bearish central bank sentiment has led the major currencies lower during June: the US Dollar lost value against its peers but the rest of the safe haven currencies also failed to pick up gains. The Japanese Yen was only up by 0.4% in June and Sterling only managed to gain 0.5% while the Euro was slightly stronger, rising 2% versus the greenback. The major winners last month were the Canadian and New Zealand Dollars that climbed around 3% against the Dollar. On the other hand, emerging market currencies managed to record very strong gains amid the US Dollar weakness but this is a trend we don’t necessarily expect to continue in the long run as the effects of the CoVid-19 crisis on their domestic economies will start becoming more obvious.
Finally, Gold was maybe the best performing instrument during June as prices pierced their previous highs and exploded to levels unseen for years. The Fed’s clear bias to cut interest rates in an attempt to stimulate the domestic recovery and the downbeat performance of other safe haven assets amid a global crisis led investors to pile on their Gold allocations. Prices have reached levels last seen in 2012 and as we expect more “safe haven” demand as we enter Q3, we would expect the uptrend in the yellow metal to keep the Dollar under further pressure, allowing for more gains in the rest of the major currencies.
Portfolio & Programs’ Review
During the month of June 2020, AENAON Syncro Algo generated a total return of +3.46% net of fees, compared to a +1.84% return for the US S&P 500 equity index.
Across the spectrum of our benchmark indices, our performance during June was strong. As an indication, AENAON Syncro Algo returned +3.46% last month against a +1.54% gain for the Barclay Hedge Fund Index, a +0.01% gain for the Barclay CTA Index, a +0.24% gain for the Currency Traders Index and a -0.11% loss for the Systematic Traders Index. The gains during June bring our total return for the first six months of 2020 to +10.18% net of fees, versus a -2.03 negative return for the S&P 500.
Throughout the year, AENAON Syncro Algo remains consistently in positive territory. Furthermore, our gains during the last month have allowed us to substantially reduce the mild drawdown observed during April-May. Even though we’re still slightly below our absolute peak reached at the end of March 2020, we are optimistic that we will soon overcome it and continue to fresh highs. Finally, our end of year target remains in line with our expectations to return a strong risk-adjusted performance for our investors during 2020.
You can always view Aenaon Syncro Algo factsheet here with monthly performance updates and statistics since inception.