The CTA sub-index of the Nordic Hedge Index advanced for a second consecutive month in October, supported by continued trends in precious metals and stock indices. Most constituents of the index ended the month in positive territory, with pure trend-following managers performing particularly well.
In October, trend strength (TSMOM), as measured by RPM’s Market Divergence Index (MDI), remained around long-term average levels as many of the major trends were (at least temporarily) interrupted. In equities, global stock markets continued to rally despite the ongoing U.S. government shutdown amid rate cut hopes and the ongoing AI hype, being only briefly deteriorated by President Donald Trump’s renewed tariff threats on China. Japanese equities jumped after fiscal expansionist Sanae Takaichi had won the leadership election of Japan’s ruling party.
In fixed income, U.S. Treasury yields declined, with the 10-year yield falling below the critical 4 percent threshold, as investors grew optimistic regarding a resolution on the above-mentioned shutdown. In FX, the Japanese Yen slumped to its weakest level against the U.S. dollar since February on diminished prospects for a Bank of Japan rate increase under the incoming, more dovish government.
In commodities, gold rallied above $4,000 per troy ounce for the first time ever before reversing significantly amid investor profit-taking, still ending the month in positive territory. Elsewhere, silver also reached a record high, outpacing gold’s rally on a percentage basis. Oil prices fell on additional U.S. sanctions on Russia’s energy sector. Coffee prices spiked as stocks of Brazilian beans in the U.S. dwindled to their lowest level since 2020 and as Trump threatened tariffs on Colombia, another big exporter. In crypto currencies, instead of the expected “Uptober,” the above-mentioned surprise announcement of tariffs against China triggered a historic sell-off, wiping out more than $19 billion in leveraged positions.
Sub-Strategies and Constituents in the NHX CTA Index
Traditional trend-following managers finished the month in positive territory, benefiting from gains in metals and stock indices. Estlander & Partners Alpha Trend, Lynx, Mandatum Managed Futures, and SEB Asset Selection all posted gains, supported by strong trends in precious metals and equities. Commodity-only manager Calculo Evolution Fund was flat as profits in metals were offset by losses elsewhere.
Non-trend-following managers within the Nordic Hedge Index delivered more mixed results. Among short-term traders, Epoque edged up 0.1 percent, while the machine learning-driven Lynx Constellation gained 2.8 percent. Macro and multi-strategy managers Estlander & Partners Freedom and Volt Diversified Alpha ended the month positively, whereas Lynx Systematic Macro finished in the red. Multi-manager RPM Evolving CTA Fund delivered another strong month, as all underlying managers posted solid gains in precious metals and stock indices.
Outlook
As far as the macroeconomic outlook is concerned, there is currently no sign of an economic slowdown or even a recession in the U.S. The Federal Reserve remains cautious but is expected to continue cutting rates nonetheless. The overall trend environment has strengthened further, though it remains to be seen whether this momentum will persist through year-end. A temporary setback before Christmas appears likely.
