Market uncertainty remains elevated but the focus doesn’t change too much – Month in Review: March 2022
Macroeconomic Environment Review
The Russia-Ukraine war remains a source of uncertainty but has not derailed financial markets. Europe is still most at risk and commodity currencies remain a good hedge but the focus is on inflation, growth and central bank reactions. The Fed is expected to hike rates the most, but the ECB has the potential to spring a hawkish surprise.
In the FX markets, the reaction has been mixed. The US Dollar Index is up 3.6% since February 23rd, but most of the gains have occurred in the first 10 days of the war. The biggest loser has been the Japanese Yen, down 7% since the start of the war. The Yen’s safe-haven function was more than offset by terms-of-trade losses due to the surge in energy prices and the widening interest rate gap with the Dollar. The Euro and the Pound both lost about 3.5%, while the Swiss Franc managed to gain versus the Euro, which reduced its loss versus the Dollar to 1.5%. The big winners were the Australian (+4.0%) and the Canadian (+1.7%) Dollars, both benefitting from the commodity link, distance to Europe and monetary policy adjustments.
We hope that a ceasefire in the Russia-Ukraine war will be reached as soon as possible, but a full peace settlement is unlikely to emerge soon. As a result, we expect uncertainty related to the Ukraine war to continue for some time. From an economic perspective, the main risk remains a further rise in energy prices. Thus, European currencies remain the most vulnerable and the best hedge continues to be commodity currencies.
Focus: AENAON Syncro strategies’ performance vs. Global risks
This month, in light of the elevated uncertainty affecting the financial markets driven by an unexpected geopolitical event like the war in Ukraine, we thought it would be appropriate to highlight the historical performance of our strategies against periods like these.
It is helpful to remember that all Syncro Strategies are designed to perform as a stable profit generator during calm market conditions but also as a safe haven option during times of uncertainty, high volatility or crisis. This is due to their design which takes inspiration from the Fractal Market hypothesis, an alternative view to how markets operate and inter-react, which doesn’t treat periods like the one we are currently going through as “one-offs”; on the contrary, this hypothesis understands that financial markets go through periods of rallies and crashes during turbulent times and instead looks to benefit from how market participants tend to react to those conditions.
As a result, our strategies continue to tread in positive territory throughout several important geopolitical or macroeconomic events and the charts below highlight how their performance remained completely unaffected during those times:
AENAON Syncro Currencies – Vanilla and Absolute Return (red lines)
AENAON Syncro Equities – Vanilla and Absolute Return (blue lines)
AENAON Syncro Diversified – Vanilla and Absolute Return (green lines)
Monthly Performance Review
During the month of March 2022, AENAON Syncro Strategies generated the following total returns net of fees:
Across the spectrum of our benchmark indices, our strategies’ performance during March was rather positive. As a comparison, the US S&P 500 equities index gained 3.58%, the Barclay Hedge Fund Index posted a 0.64% advance, the Barclay CTA Index added 2.78% while the other benchmark indices can be seen on the chart below.
Chart 1: Monthly Performance vs. Benchmark Indices – March 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: