Using a combination of short, intermediate, and long-term trends across the major markets within a sector, we make judgments on potential trend behavior for the coming month. Our signals are surprisingly mixed as we move into the post-Labor Day period. While there are some upward and downward biased sectors, all seem more range bound with no consistency between short and longer-term trends. This was after a good trading month in August.
US equity markets continue to move higher although global markets are not showing the same pattern.
Bonds are mixed given the risk-on environment and the demand for safety on an international level. Rates are consistent with steady central bank policies.
Currencies reflect the risk in EM, but the dollar rally seems to have lost the momentum seen earlier in the summer.
Precious metals markets have continued to negatively correlate with dollar movements while base metal price directions are mixed on global growth prospects.
Energy prices have not exceeded highs from earlier in the summer and commodities have been more sensitive to tariff talks.
Markets may be subject to break-outs this month, but current price action does not point in any strong direction.
After hundreds of discussions with hedge fund managers, I am still surprised that there is a fear of revealing investment processes under the assumption that someone will steal their ideas and intellectual capital. There are few investment styles that are truly unique and special. What is special is still strategy execution – the practical process of delivering returns. Skill is with the decision-making execution of information and strategy.
All hedge funds are not created equal as the return box chart shows for the post Financial Crisis period. There is a significant amount of dispersion across hedge fund styles. Over the period 2009-2018, the difference between the best and worst hedge fund category is almost 7 percent after we account for global equities and bonds.
The attraction to private equity and other less liquid alternatives is clear from the Guide to Alternatives by JP Morgan Asset Management. The return profile is much higher for private equity and debt funds than more liquid alternatives and global bonds; however, the dispersion in returns is multiples higher than what can be expected from other public categories.
