Blog Archives

ALTERNATIVE MARKETS UPDATE Q3 2020 - MACRO OUTLOOK BY AQUILA MARKETS

23/10/2020

Alternatives Market Update October 2020

The coronavirus has hit the world severely in 2020. Europe, which had the virus under control in summer, has seen a huge surge in daily cases among almost countries. Some countries, such as Ireland, have already reacted with measures that are close to a lockdown which many countries have experienced in March and April 2020. Stock prices, especially in the US, have risen to record levels, due to the money printing of central banks, all above the Fed. However, at the end of Q3 2020, stocks have not continued their bull run after the crash and have started to decline. Especially tech stocks, which were undeniably the winners of the crisis, have experienced a decline. Nevertheless, the drawdowns now are in no comparison of the gains realized throughout the crisis. The developments observed in the stock market also apply partly to the macroeconomic indicators of recovery, as shown in Figure 1. It shows that the economy globally as well as the US are recovering, whereas Europe and Japan are moving flat.

Figure 1: Economic Indicators by Country, Source: Andrews Gwynne, Haver Analytics, CEIC, IMF & Morgan Stanley Research, October 2020

Hedge Funds

Figure 11 and 12 show our internal strategies compared to appropriate benchmarks. Our SMC Credit Strategy Index is up 2.11% as of September 2020. The SMC Equity Strategy Index has recovered quite well over the year and is up 13.90% with the most successful individual strategies being the Long/Short US Equities Disruptive Technologies strategy with a YTD of 48.20% and the Long/Short US Equity Consumer, TMT, Healthcare strategy with a YTD of 50.08%. Our SMC Tactical Trading Strategy Index is up 104.28% as of September, large based on various cryptocurrency-based strategies. These are further elaborated in the cryptocurrency section. Regarding individual strategies, the Discretionary Global Macro strategy did very well in 2020 with a YTD of 60.75%. The AuM of the hedge fund industry is at $3.22tn as of August 2020, according to Figure 13. The industry recovered quite well, as the AuM dropped way below $3tn during the year 2020, and it is now almost back at the level of $3.29tn, where it was at the end of 2019. The most common strategy (by AuM) is long/short equity, which accounts for 34% of the industry’s AuM. The next most common strategies are multi-strategy and CTA/managed futures but these strategies already account for a substantially lower percentage of the industry’s AuM. A further breakdown of strategy volume by AuM is shown in Figure 14.

Figure 11: SMC Indices and a Comparison of Benchmark Indices, Source: Stone Mountain Capital Research, October 2020

Figure 12: Summary Table of SMC Indices and a Comparison of Benchmark Indices, Source: Stone Mountain Capital Research, October 2020

ALTERNATIVE MARKETS UPDATE - MACRO AND POLITICAL OUTLOOK OCTOBER 2020

9/10/2020

Alternative Markets Update October 2020
The Covid-19 crisis does not seem to stop, as many countries are facing a severe increase in cases, as the northern flu season is about to start. In Europe, where the spreading of Covid-19 has decreased during summer, has seen a huge resurgence of cases among most countries, some of them even topping the spreading back in March (such as Austria). In the US, where the situation with Covid-19 did not really improve during summer, the President was infected and hospitalized for two days, is now back in the office. The tension is increasing, as the election is less than a month away and due to the chaotic presidential debate. Figure 1 shows the US unemployment rate over a seventy-year period. Due to Covid, it spiked to an all-time high (not considering WWI and WWII). Nevertheless, the unemployment rate already halved again as of the last report in early October and is now 7.9%. In times of crises, real assets such as gold tend to do very well. Through this crisis we have seen the first time how cryptocurrencies do during such times, and they delivered what was expected.

Bitcoin (BTC) and Ethereum (ETH) are up 46% and 159% for the year. This boost in the main cryptocurrencies also affected the value of DeFi (decentralized finance). Figure 2 shows the value locked in DeFi, which has surpassed the $11bn mark compared to around $1bn at the beginning of 2020. Our crypto strategies have worked well in 2020 with YTDs between 62% up to 323% (see table above).

U.S. Employment Rate in Percentages, Source: Charlie Bilello & Compound, October 2020

Value Locked in Decentralized Finance, Source: Pantera Capital, October 2020

Macro and Political Outlook October 2020 by Macro Eagle
October PREVIEW
Packed calendar ahead. This week we get employment in the US, while China goes on holiday for week (mid-autumn festival). Next week we have the only VP debate, plus we will find out if Congress manages to pass another relief-package before the recess starts on Columbus Day (Oct 12th). Then, the Third Week promises fireworks with the EU Council meeting battling over the recovery fund, the EU budget and Brexit. We also get the 2nd Presidential debate, the start of Q3 Earnings and tons of economic data. After that, the Fourth Week brings us the 3rd Debate. Interestingly, on the same day, the FDA will hold a “vaccine update committee”, which makes me think that this could provide a platform for Trump to announce a tactical “huuuuge breakthrough – biggest ever”. Finally, the Fifth Week will feature the ECB (strategy review, PEPP, maybe AIT) while everybody else is counting the days to Election Day the week after. With the al-fresco days of summer now officially over, the start of the “normal” Northern flu season is upon us, so before we talk about the US election, let us quickly turn to Covid.

An Overview of Upcoming Events in October 2020, Source: Macro Eagle, 2020

ALTERNATIVE MARKETS UPDATE Q3 2020 - MACRO OUTLOOK BY AQUILA MARKETS

ALTERNATIVE MARKETS UPDATE - MACRO AND POLITICAL OUTLOOK OCTOBER 2020

​Archives

Categories

Archives