Time for optimism at the end of the year? – Month in Review: November 2020
Macroeconomic Environment Review
After the clear result in the US elections in favor of the Democratic Party, the US stock markets posted handsome gains during November. Even though the Trump administration attempted to challenge the results in several states, these efforts fell through and now the road is clear for much-needed change in the US political arena. However, the upbeat expectations in light of Joe Biden’s win will now probably clash with the elevated number of Covid-19 cases in order to determine whether the return to normalcy in the US will come sooner or later; in my view, even though we should see more loss of life due to the pandemic, the news about the upcoming vaccine will likely dominate the headlines and support some kind of optimism.
Will this spread to the FX universe though and allow the Dollar to recover? Most likely not and the reason is clear: the US currency reacts negatively to positive mood changes and it will likely continue to ease against currencies with a positive correlation to the improved risk bias. The key, however, is to be able to judge which currencies will gain more in light of the greenback’s weakness.
The Euro looks poised to be among the front-runners to benefit from the Dollar’s stance towards the end of the year. A current account surplus and news that vaccinations are about to start will provide a lift but keep in mind that the structural problems of the currency haven’t disappeared. As such, I see the moderately positive bias to continue pushing prices slightly higher. On the other hand, the Japanese Yen appears as a solid candidate to gain more versus the Dollar and prices may breach the November highs. Conversely, Sterling looks vulnerable and with the Brexit negotiations still going nowhere, the 1.30 area may be penetrated to the downside quite soon – barring any last-minute surprises.
Portfolio & Program Review
Across the spectrum of our benchmark indices, our performance during November was rather pleasing. As a comparison, AENAON Syncro Currencies returned 2.60% last month, versus a 10.75% return for the US S&P 500 equities index, a 5.78% gain for the BarclayHedge Fund Index, a 1.20% advance for the Barclay CTA Index, a -0.57% decline for the Currency Traders Index and a 1.23% gain for the Systematic Traders Index.
Just one month away from the end of the year, our flagship program is on track to post a positive return for 2020, in line with our target. The minor drawdown observed a couple of months ago is almost behind us and we should be able to end the year in a strong fashion.
You can always review AENAON Syncro Currencies’ updated factsheet at our Fundpeak link, with monthly performance updates and statistics since inception.
Finally, as our next communication will come in January, please allow me to wish each and every one of you a Merry Christmas and a Happy New Year from the bottom of everyone’s heart here at AENAON Markets. On behalf of our team, we’d like to once again thank you for your continued trust in our services and we hope that 2021 will bring everyone peace, love, and prosperity.