FX Multi Strategy Program – January 2019

As the year ended its trading sessions with increased volatility, global equity markets pushed into negative territory. In the US, markets were driven lower over concerns of recession risk and its impact on future rate hikes. This was a marked difference to the positive sign to which the year opened with. As a consequence to the December slump, US equities ended the year in the red for the first time in a decade. The weak risk asset performance spilled over into other markets as well. Global government bond yields fell as yield curves flattened in the onset of slowing global growth expectations. In light of the turmoil facing the financial markets along with diminishing returns, our FX Multi Strategy program fared well. Producing positive returns for 2018 the FX Multi Strategy program achieved targeted positive risk-reward returns.

The US Federal Reserve hiked rates four times during the year. This was a widely expected move, however expectations for further hikes during 2019 is coming back. It was the FED’s decision to tighten interest rates during a period of restricted conditions possibly resulted in the equity sell-off. In Europe, the European Central Bank (ECB) announced the end to its assets purchase program. Since the ECB marginally lowered its growth forecast expectation, this has left little room for future rate hikes. Investors are also concerned with the political storm that develop in France following the ‘yellow vests’ protest. The demands for minimum wage increases as well as tax concessions resulted in France increasing its planned budget deficit. In the UK, the ongoing Brexit negotiations have showed little progress.

Running Half Open

The US government entered the year partially closed. As a result investor risk appetite was at low levels as the year opened. The financial impact of this government shutdown can be recovered during the remainder of the year. However, the affect over the long term can definitely affect business sentiment in the US. There are still some positives which investors can focus on though. As the US Administration improves its rhetoric towards China, global trading optimism develops. Furthermore, signals from the FED of fewer interest rate hikes during this year will help risk assets to recover some losses. Regardless of these positive signs risk assets are being held back. For starters political uncertainty remains a headwind. In addition the macroeconomic data releases continue to provide mixed signals over the strength of global growth.

Understanding these risks that are in play are of paramount importance to the potential successes of our FX Multi Strategy program. In this trading scenario our goals are to seek diversified strategies with unique investment methodologies. The program gains can be achieved within the strategy targets as risk is diversified across a broad range of trading styles.