Disclaimer: While an investment in managed futures can help enhance returns and reduce risk, it can also do just the opposite and in fact result in further losses in a portfolio. In addition, studies conducted of managed futures as a whole may not be indicative of the performance of any individual CTA. The results of studies conducted in the past may not be indicative of current time periods.  

What a wild past 27 hours across Macro.  Yesterday was one of the most anticipated Fed meetings in memory.  Markets were looking for a cut of 25 and hoping for more – either yesterday or in the near future.  What we got was 25 and a bumbling press conference where Powell seemed to have no clue what was driving Fed policy at this point.   The best we could take away was further trade uncertainty may result in those much begged for rate cuts.  But this was just a guess, and that’s the point.

Markets rolled over yesterday and for the first time since the outset of this giant money printing project 10 years ago,  we had markets questioning the credibility of the Fed and future policy.  Now, with the absence of clear policy drivers, we believe that just wouldn’t fly.  However, we saw a violent swing to risk on all morning.  Our positioning was exited and we were down around 90 bps on the day and flattened up across the board.

Truthfully, I was looking for us to take some time off and reassess – I think most managers need to given the confusion delivered by the Fed.  Then came the tweet – more tariffs.  From Trump’s perspective an obvious and brilliant play.  Powell says we need more uncertainty in trade for cuts, and trump gives it right to him.

Now we have a clear narrative of a Fed that is held to the whim of the President, and trade policy now has a clear path to full out escalation.  I believe this is a situation that risk will not tolerate, and we should see heightened vol in what we thought we would be a quiet month.

Given the day’s p/l, positions were carefully entered. Gold longs and volatility spreads were put back on and added to as price confirmed.  Gold is ripe to rip higher here as longs were taken out with the violent sell-off yesterday (us included there).  Ultimately, I still look for the 1532 area where china stuck its foot in the ground years ago.  We are short ES here as well, and I would keep on eye on the EURO/YEN cross here.  Interesting days ahead for sure.

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