CTA Strategy Signals – Monthly Update

Following a fairly weak start to the year the US economy is looking to make a rebound and show strength. Benefited by a sustained period economic boost instead of the intermediate spurts of growth resulting from politically driven factors. This general increase in the performance of economic data translated well to the CTA strategy signals, in particular for trend followers. US consumers were one of the factors that lent to this favourable scenario. In addition there are signs supporting a robust labour market keeping the economic fundamentals in good shape.

That said, there is currently little sign of any acceleration in activity or inflation. Any potential stimulus from the Trump administration is not a definite decision in potential policy making. The gently positive momentum displayed this year in sustain global economic growth appears to remain intact. This is despite the swings in short-term market sentiment impacted by political events. In the Eurozone the economic indicators received a boost following the French election and the upbeat numbers in growth and expansion data supports a view of a region that shows broad signs of recovery.

Currency Markets Rallied on Political Events

Strategies trading the currency markets benefited from trending patterns that emerged throughout the month. The politically driven events centred on the Eurozone government elections spilled over to a broad rallying of the common currency. Sustaining this scenario over the month benefited CTA strategy signals. This was a welcomed change to the past months of fluctuating range bound markets that dominated the currency trading environment.

Volatility increased with technically driven trends showing signs of continuation or quick reversals. Consequently, as the markets reacted to shifting economic sentiment this would lead on to new trending periods.

China Slowdown Pressured Commodity Markets

The risk of increased correlation between invested asset classes diminishes when investing in a diversified CTA strategy. This was a clear benefit when seeking CTA strategy signals. Evidentially, across a range of different markets the price patterns trending behaviour. Signs of a strengthening US economy as well as a bolstered Eurozone lifted global equities but that usually comes at the expense of softer interest rate markets.

The commodity markets were pressured by a slowdown in China as global demand dips. However as a turnaround in volatility and price movement opportunities for new trending environments appeared as the markets seeks confirmation of a new direction.