Absolute Return

Financial markets took a breather over August.

It is not unusual for the quiet summer season when investment professionals take a break from their screens to chime with nervous and volatile markets.

A relatively buoyant environment for Equity Market Neutral strategies.

Looking back over the first half of the year, we can say that the bulls gained the upper hand over the bears.

With the onset of the inflationary cycle and the change in central bank monetary policy, markets have entered a new paradigm, leaving investors uncertain as to the direction that markets will take next, and the timing of the transition into the next phase of the economic cycle.

In a market animated by contradictory economic data points, NVIDIA’s excellent Q1 earnings were enough to light the fire under an already hot technology sector.

The market narrative remains very cautious and divided as to the path to follow over the next few quarters.

March was a challenging and volatile month, with investment sentiment going through a whole variety of shades in a single month.

During February, economic and inflation data came in slightly above expectations, which helped cool the market down. Central banks reiterated the message that the market should expect monetary policy to maintain its course until we see significant signs that inflation is abating.

2023 started out on the right foot for holders of financial assets, as the overall performance of equities and bonds was positive. However, a significant part of the financial community is bedazzled by the vigour of the rebound.

2022 was a very challenging year for traditional asset allocations, with the active repricing of risk premiums taking centre stage.

In 2022, the markets repriced risk premiums in financial assets, quickly adjusting to the inflation risk and to the interest rate hikes implemented by central banks that followed.

Although the economy continues to decelerate, equities staged a strong rebound during the month of October.

If the smile measures how the portfolio value reacts to changes in the underlying markets, then maybe we should measure the smiles – and this is what our investment team has been doing.

September was another very challenging month for investors. The market is subject to considerable uncertainty, with no clear evidence of the next step.

After a two-month period of improving risk appetite, the market started to head downwards in mid-August, influenced by the outcome of the Jackson Hole meeting. Jerome Powell’s hawkish tone obviously had a strong impact on the markets, but it was not the only strong driver. The deterioration of energy supply in Europe as we are quickly approaching winter is a cause for concern for industrial output, but also consumers, who will be facing record energy bills.

As the investment community was slowly preparing for a well-deserved summer break, a higher-than-expected US CPI read revived fears that a recession might be around the corner. Uncontrolled inflation is pushing central bankers to continue raising the cost of capital, as the Fed did at its June meeting.

As governments continue to maintain low interest rates through the COVID-19 pandemic, and the correlation between asset classes remains high, the questions of diversification, income and attractive returns are firmly on investors’ agenda. You can now listen to the replay of our recent webinar which looked at the relevance of the multi asset absolute return approach in today’s investment markets and introduced our two risk-rated portfolios that meet your requirements.

Markets remain nervous, as investors perceive the Fed as being behind the curve in taking control over inflation. Rising prices are biting into consumer sentiment and savings, leading to decreasing growth expectations.

After several decades of riding a government bonds bull market, investors are now looking for alternative drivers of return. Commodity Trading Advisor (CTA) strategies, with their ability to make gains in rising, as well as falling markets, have historically been able to improve risk-adjusted returns when introduced to a balanced portfolio. However, a question that investors can legitimately ask today is how are CTAs impacted by rising interest rates?

There are currently so many headwinds to the economy that it is difficult to isolate THE driver that is having the biggest impact on deteriorating economic fundamentals in only a small paragraph.

The global economic outlook is foggy, and the start of the year has kept on adding additional layers of complexity.

There is a lot of dust in the air for the moment

January was a challenging month for investors.

The markets navigated a bumpy road to the end of the year