Prolonged uncertainty to revive the Dollar? Month in Review: January 2021
Macroeconomic Environment Review
During the first few weeks of the year, the theme in the currency markets revolved around the next trend in the US Dollar. The greenback started 2021 on a strong footing amid a prolonged state of uncertainty and continued financial markets’ volatility. The question, from a macro perspective, remains “will this be a stronger year for the Dollar?” and we believe the answer will depend on a few factors. Will the US manage to recover quickly from the Coronavirus-attributed slowdown? How will a faster or slower recovery affect its dual deficit, and will the Fed be willing to start tightening its policy sooner than later?
From a macro standpoint, there’s a number of factors that allow for some optimism: the political uncertainty surrounding the previous administration is now gone and Biden is attempting to establish a much calmer and predictable foreign and domestic policy. Furthermore, vaccination efforts against Covid-19 in the US seem to move forward with limited delays, especially when compared to the state of things in Europe and elsewhere. Moreover, business sentiment in the States ticked higher in January and finally, the derivatives’ markets still indicate a sizeable net short positioning from institutional investors, which should allow further room to the upside for the buck.
All these indications seem to build a strong case for a Dollar recovery, at least in the short-to-medium term, and our program will look to benefit from any momentum-driven moves in our instruments’ universe. Our alpha models do exceptionally well when the price action in the markets is more “pronounced” in comparison to the more “subtle” moves seen during January, so we’re rather optimistic for the month ahead.
Performance Review January 2021
Across the spectrum of our benchmark indices, our performance during January was rather mixed. As a comparison, AENAON Syncro Currencies returned -1.58% last month, versus a -1.11% return for the US S&P 500 equities index, a 0.98% gain for the Barclay Hedge Fund Index, a -0.06% loss for the Barclay CTA Index, a 0.47% gain for the Currency Traders Index and a -0.49% decline for the Systematic Traders Index.
Chart 1: Performance vs. Benchmark Indices – January 2021
At the beginning of the year, the macroeconomic and geopolitical environment remains complicated, but we feel confident that 2021 will be yet another positive year for our flagship program. Since its inception in 2016, it has seen its fair share of unusual events and market conditions, but its quantitative and data-driven approach has allowed it to profit regardless of the overarching themes.
You can always review AENAON Syncro Currencies’ updated factsheet at our Fundpeak link, with monthly performance updates and statistics since inception.
Awards and Rankings
For our early investors, this must ring a familiar bell: at the end of 2019, our flagship AENAON Syncro Currencies program ranked #1 by Net Return by Barclay Hedge in the “Currency Traders Managing Less Than $10M” category for the whole year. During 2020 though, our program received a sizable institutional allocation which brought its AUMs above the $10M threshold.
However, even though we now compete in the “big boys” league, the awards didn’t stop coming in. Thus, it is with great joy that we are now announcing that AENAON Syncro Currencies has ranked #6 by Net Return by Barclay Hedge in the “Currency Traders Managing More Than $10M” category for 2020. During the year, we received several top rankings on the monthly Barclay Hedge lists but the honor of receiving such a top placement among global leaders in our field dwarfs all other achievements.
You can read the full news on our website by following this link.