The war-fueled rise in uncertainty may benefit the Dollar, but will this last? – Month in Review: February 2022
Macroeconomic Environment Review
Russia’s attack on Ukraine and the firm response by Western allies are both sea changes with far-reaching consequences. The near-term outlook is very uncertain but the crisis is not systemic in our view. We think the war will slow but not derail the global recovery. Central banks will take that into account but are unlikely to revert their efforts to normalize policy. On balance, this is positive for the US Dollar but probably not a lot.
The main channel of potential economic damage is through a disruption of energy supply (energy prices fell sharply during the Lehman and Corona crises but are rising in the current crisis). Russia accounts for more than 10% of the global oil and gas supply, with Europe particularly dependent on Russian gas. A shutoff in Russian oil and gas exports is a real threat. For FX markets the question is how much the disruptions will mute the global growth optimism and how central banks will react to softer growth prospects and higher inflation.
In our view, central banks will moderate their rhetoric but stay focused on containing inflation as long as systemic risks remain contained. On balance, we believe that growth dynamics and central bank actions will be positive for the USD in the near term. However, the USD upside is limited in our view and could turn into a downside if the global economy stays on the recovery path and other central banks continue to normalize policy as well.
Monthly Performance Review
During the month of February 2022, AENAON Syncro Strategies generated the following total returns net of fees:
Across the spectrum of our benchmark indices, our strategies’ performance during February was more or less on par with the rest of the markets. As a comparison, the US S&P 500 equities index lost -3.14%, the Barclay Hedge Fund Index posted a -1.0% decline, the Barclay CTA Index added 1.03% while the other benchmark indices can be seen on the chart below.
Chart 1: Monthly Performance vs. Benchmark Indices – February 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: