Stagflation and global growth worries underpinned the US Dollar – Month in Review: September 2021
Macroeconomic Environment Review
The US Dollar rallied across the board in September, gaining 1.7% versus the rest of the major currencies and 2.9% versus the Emerging Market currencies. The main reason why the greenback received more support during the past few weeks has to be the persisting concerns over global growth and how the Fed will react to this.
Moreover, recent data from the other side of the Atlantic also printed better compared to the soft figures from the rest of the world, which further underpinned the momentum behind the Dollar. The buzzword for September however was “stagflation” and whether we’re entering an era of persisting low growth while inflation points higher. The further these conditions seem to be making headlines, the longer the pro-Dollar bias will endure, especially in the near term.
On a global level, the broader growth concerns including the spread of the Delta variant, the bottlenecks in the supply chains and China’s policies take their toll on the dovish data seen recently, which force growth revisions to point lower. However, the key question here is whether these factors are transient in nature and we think that the answer is more likely positive. With that in mind, the way forward for the equity markets seems to be pointing higher, especially while the major central banks are still far away from moving into restrictive monetary policy areas.
New: More information on our systematic strategies
Starting this month and going forward, we will use this monthly letter to keep you updated with the latest returns from all our systematic strategies, which in addition to our flagship quantitative FX-focused AENAON Syncro Currencies strategy, also include: AENAON Syncro Equities, a quantitative US cash equities strategy and AENAON Syncro Diversified, a quantitative multi-asset strategy, with exposure in both equities and currencies markets.
And adding to that, going forward we will also be releasing the returns of the two “versions” each strategy can be deployed in: the Absolute Return and Vanilla return profiles. Quite simply, the difference between these profiles is that the Absolute Return version applies a simple, yearly reinvestment of profits at the end of each 12-month period while the Vanilla version never reinvests any yearly profits, which are available to be withdrawn or reallocated elsewhere.
From our experience, the Absolute Return profile is ideal for those looking to achieve the maximum total return on their capital, while the Vanilla profile will best suit those looking for a source of passive income on a yearly basis. To remind you of this difference, we will be adding a simple one-line note that the end of each letter, with a quick explanation. For more information on all our systematic strategies, their return profiles and historical returns, we’re always at your disposal to provide all their details and historical performance.
Monthly Performance Review
During the month of September 2021, AENAON Syncro Currencies generated a Total Return of 4.94%, AENAON Syncro Equities returned +3.30% and AENAON Syncro Diversified added 4.01% net of fees.
Across the spectrum of our benchmark indices, our strategies’ performance during September was strongly positive. As a comparison, the US S&P 500 equities index dropped -4.76%, the Barclay Hedge Fund Index posted a -0.95% downtick, the Barclay CTA Index gained 0.37% while the other benchmark indices can be seen on the chart below.
Chart 1: Monthly Performance vs. Benchmark Indices – September 2021
Charts 2 and 3: Inception to Date Performance vs. Benchmark Indices
You can always review AENAON Syncro Currencies’ updated factsheet at our Fundpeak link, with monthly performance updates and statistics since inception.
