US elections done and dusted (?) – Month in Review: October 2020
Macroeconomic Environment Review
Following September’s decline, the S&P 500 retreated further during October as the run-up to the US elections was filled with controversy while the Covid-19 cases started picking up pace again. However, the early days of November provided a fresh lift to the US benchmark and we’re now seeing a test of earlier highs – our expectations suggest that with the election result pretty much clear now, US equities will see a short-term boost.
Having said that, I want to stress one thing though: during the late days of the pre-election campaign, voters gather en-masse to voice their support for one candidate or the other in the midst of a pandemic. Unfortunately, this can only lead to one thing and that is more Coronavirus cases in the US. So, the question becomes: can the US stock market weather another massive wave of deaths, lockdowns and unemployment? To be continued…
Now, in regard to the FX currencies, which is our main focus with the Currencies program, the Dollar traded mostly sideways during the past month. This was down to the change in investors’ expectations on how the US elections would unfold: the initial feeling that Joe Biden would have little problem in getting over the line was replaced with a bated breath as the elections were coming closer, propelling the greenback higher.
Now with the elections behind us, and even if the US currency started the month on the decline as market participants are reacting to the apparent win for the Democrats, we remain reserved: will Trump concede after all and accept the results or will he take his case to the courts, or even worse, on the road? Should the first scenario take place, we expect the Dollar to ease further in the medium term, but investors need to be aware of the second case as well. If the sitting US President starts rallying his supporters and scheduling gatherings around the country, all hell could break loose and the risk-off reaction will push prices higher. Volatility is here to stay…
Portfolio & Program Review
Across the spectrum of our benchmark indices, our performance during October was rather uninspiring. As a comparison, AENAON Syncro Currencies returned -2.10% last month, versus a -2.77% return for the US S&P 500 equities index, a -0.22% loss for the Barclay Hedge Fund Index, a -0.25% loss for the Barclay CTA Index, a -0.12% decline for the Currency Traders Index and a -0.43% retreat for the Systematic Traders Index.
Having now entered the final quarter of the year, our flagship program is still on track to post a positive return for 2020, in line with our target. Even though we have stayed in positive territory all year, October’s decline does stretch our drawdown a little bit but with the most important “unknowns” now behind us, we should be able to end the year in a positive fashion.
You can always review AENAON Syncro Currencies’ updated factsheet at our Fundpeak link, with monthly performance updates and statistics since inception.