Alternative Markets update december 2020

Alternative Markets Update December 2020 
Unsurprisingly, BTC tops this chart with an annualized return of 206.4% and a great 2020 so far with 188%. The next most successful asset class are US stocks with an annualized return above 10%, as well as being up more 16% for 2020. Our equities rose on average 7.6%, with two strategies performing exceptionally well. The Long / Short US Equities Consumers, TMT, Healthcare strategy and the Long / Short US Equities Disruptive Technologies strategies are both up more than 57%. Gold that ranks third in this year’s return, despite a continued fall since reaching its peak in August, is the third worst performing asset class over the last ten years, even though it retuned 17.9% and 22.4% in 2019 and 2020. The worst performing asset class are other commodities with an annualized return of -6% over the last ten years.

Figure 1: Asset Class Total Returns over the Last 10 Years, Source: Compound & Charlie Bilello, December 2020

Commodities, aside from gold, mostly had a bad year. Figure 3 shows how commodities have developed in comparison to the US stock market. The essence is that commodities have never been worth so little in comparison to equities and after each crisis, there was a huge turning point. The worst start in 2020 certainly had oil, whose futures (WTI Crude) went negative when the crisis picked of steam in developed economies, which was thought to be impossible. It then recovered fairly quickly and stabilized at $40 for WTI Crude ever since, which was the case for most commodities. Towards the end of November, it started to surge again and continued to do so in December and is currently at $47 per barrel. A major driver for this development is certainly the start of vaccinations and the expectations of going back to normal relatively soon. Brent crude oil experienced a similar rally, although it started to soar earlier and thus gained a bit more than WTI. Brent Crude is now trading at $50 per barrel. Another commodity that has recovered very well is copper. It is trading at 7,068$/mt and has just slightly surpassed its highs from early 2018. During the crisis, it was trading at around 5,000$/mt. Furthermore, the price of copper is unlikely to decrease in the near future, as the stockpiles have not been as low since 2014

Figure 3: GSCITR Commodity Index / S&P 500 Ratio, Source: Andrews Gwynne & Incrementum, December 2020

Figure 4: Crude Futures Front Month Close, Source: Andrews Gwynne & IEA, December 2020

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RESEARCH PERSPECTIVE VOL. 146 December 2020 Alternative Markets Update December 2020 After a very successful November 2020, during which most asset class rose significantly, December 2020 continued similarly for some asset classes and a bit more volatile for others. November 2020 was great for equities, as the 10% gain of the S&P 500 shows. December 2020 is positive as of mid-December but not to the same extent. Another asset class, such as cryptocurrencies and in particular Bitcoin (BTC) had a stellar performance in November with 42% and did not slow down at all and being up already 23% as of 19th December 2020. Gold has suffered quite substantially in November, as its peak was $1950 per ounce and fell to below $1800 per ounce, the lowest since July 2020. In December, it is recovering quite well and is almost back at the $1900 per ounce. The following Figure shows the return of different asset classes over the last years. Unsurprisingly, BTC tops this chart with an annualized return of 206.4% and a great 2020 so far with 188%. The next most successful asset class are US stocks with an annualized return above 10%, as well as being up more 16% for 2020. Our equities rose on average 7.6%, with two strategies performing exceptionally well. The Long / Short US Equities Consumers, TMT, Healthcare strategy and the Long / Short US Equities Disruptive Technologies strategies are both up more than 57%. Gold that ranks third in this year’s return, despite a continued fall since reaching its peak in August, is the third worst performing asset class over the last ten years, even though it retuned 17.9% and 22.4% in 2019 and 2020. The worst performing asset class are other commodities with an annualized return of -6% over the last ten years. Figure 1: Asset Class Total Returns over the Last 10 Years, Source: Compound & Charlie Bilello, December 2020 Tesla, probably the most talked about stock in 2020 aside from Amazon, had a fantastic year with a YTD of 708% and the inclusion in the S&P 500 is a great way to end the year. Even cryptocurrencies are no match to Tesla in terms of this year’s return.  BTC has surged massively last week, just after MassMutual’s announcement to put $100m in crypto. As a consequence, BTC has reached $20k for the first time, and with this resistance level broken, it almost instantaneously surged to above $21k. Afterwards, each one or two days later, it gained another $1k. On Saturday, BTC has surpassed the $24k mark but dropped again below it. BTC is currently trading at 23,418$ (20th December 2020) and has a market capitalisation of $435bn. Another interesting thing to watch during this rally is the AuM of Grayscale’s crypto funds, which is now managing $15.5bn. Figure 2 shows the milestones of BTC and how much time was between them. The Figure further emphasizes how important it was to break the $20k mark, as only the jump from $1k to $2k has taken more time. Based on these developments during 2020, it is unsurprising that all our crypto strategies are topping the performance charts. The Token strategy has outperformed the other crypto with a staggering YTD of 353%. However, the remaining three strategies did also very well with YTD returns between 166% and 200%.Ethereum (ETH) also profited strongly from BTC’s breakthrough, as all cryptocurrencies have. ETH is now trading at $650 (as of 20th December). ETH has a market capitalization of more than $74bn and its YTD is substantially higher than BTC’s with 399%. However, this number is caused by the fact that ETH was trading a lot lower in early 2020 than BTC did, especially in comparison to their respective peaks in 2017. Despite those great numbers, BTC has now surpassed its peak from 2017, while ETH is still far off with being at only 650$, when it was more than $1.3k in early 2018. Figure 2: Milestones of Bitcoin, Source: Coindesk, Compound & Charlie Bilello, December 2020 Commodities, aside from gold, mostly had a bad year. Figure 3 shows how commodities have developed in comparison to the US stock market. The essence is that commodities have never been worth so little in comparison to equities and after each crisis, there was a huge turning point. The worst start in 2020 certainly had oil, whose futures (WTI Crude) went negative when the crisis picked of steam in developed economies, which was thought to be impossible. It then recovered fairly quickly and stabilized at $40 for WTI Crude ever since, which was the case for most commodities. Towards the end of November, it started to surge again and continued to do so in December and is currently at $47 per barrel. A major driver for this development is certainly the start of vaccinations and the expectations of going back to normal relatively soon. Brent crude oil experienced a similar rally, although it started to soar earlier and thus gained a bit more than WTI. Brent Crude is now trading at $50 per barrel. Another commodity that has recovered very well is copper. It is trading at 7,068$/mt and has just slightly surpassed its highs from early 2018. During the crisis, it was trading at around 5,000$/mt. Furthermore, the price of copper is unlikely to decrease in the near future, as the stockpiles have not been as low since 2014, as Figure 5 shows. Figure 3: GSCITR Commodity Index / S&P 500 Ratio, Source: Andrews Gwynne & Incrementum, December 2020 Figure 4: Crude Futures Front Month Close, Source: Andrews Gwynne & IEA, December 2020 Figure 5: Global Stockpile of Copper, Source: Andrews Gwynne, Cemex, London Metal Exchange and Shanghai Futures Exchange, December 2020 STONE MOUNTAIN CAPITAL Stone Mountain Capital is an advisory boutique established in 2012 and headquartered in London with offices Pfaeffikon in Switzerland, Dubai and Umm Al Quwain in United Arab Emirates. We are advising 30+ best in class single hedge fund and multi-strategy managers across equity, credit, and tactical trading (global macro, CTAs and volatility). 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