Further uncertainties ahead to favor more gains for the Dollar? – Month in Review: May 2022
Macroeconomic Environment Review
The US Dollar has been the supreme performer so far this year. The US Dollar Index rallied 9.7% from the start of the year through the middle of May. USD strength was broad-based versus all other major currencies with only the AUD and the CAD falling less than their peer. The performance of EM currencies versus the USD over the same time period has been more mixed with some clear winners like the BRL (+8.4%) and ironically the RUB (+15.8) and some clear losers like the CNY (-6.6%) and the TRL (-13.8%).
The Ukraine war, China’s lockdown, high inflation and rising interest rates continue to slow the global economy. Developed markets are hit harder than emerging markets yet the latest data shows more resilience in the Euro-area, while the US is feeling more of the global drag. Recession still seems to be the less likely outcome, thanks to the recovery momentum coming out of the Corona pandemic, but the risks are significant. The Ukraine war is turning into a conflict between Russia and Nato, while China struggles to find an exit from its No-Covid strategy. Inflation should peak soon unless energy prices surge again, but underlying inflation pressures will force more central bank tightening.
Looking ahead, the Dollar is likely to gain further if uncertainties remain large. Indeed, the risk is that geopolitical and global growth uncertainties could rise again. Russia’s offensive in the eastern part of Ukraine seems to succeed and could lead to a broader conflict with NATO including a bigger energy squeeze. The Corona situation in China seems to be improving a bit, but that may prove temporary as there are no signs that China has made progress in effectively vaccinating the population. Market sentiment remains fickle and the US Dollar could bounce back if these or other uncertainties rise again.
Monthly Performance Review
During the month of May 2022, AENAON Syncro Strategies generated the following total returns net of fees:
Across the spectrum of our benchmark indices, our strategies’ performance during May was very mixed, with strong gains for the Equities’ strategy while the Currencies’ model suffered strongly. As a comparison, the US S&P 500 equities index gained 0.01%, the Barclay Hedge Fund Index posted a -0.65% decline, the Barclay CTA Index lost -0.17% while the other benchmark indices can be seen on the chart below.
Chart 1: Monthly Performance vs. Benchmark Indices – May 2022
Charts 2, 3 and 4: Inception to Date Performance vs. Benchmark Indices
You can always review our updated factsheets at the following Fundpeak links, with monthly performance updates and statistics since inception: