The NHX CTA Index rebounded strongly in August, supported primarily by gains in currencies and equity markets. Most managers and sub-strategy groups finished the month in positive territory, marking a notable recovery from the weaker performance seen in July.
Last month, time-series momentum (TSMOM), as measured by RPM’s Market Divergence Index (MDI), rose steadily from relatively low levels as several trends across financial markets gained strength. In equities, U.S. stocks advanced to new record highs in the first half of August as concerns about an imminent rate hike by the Federal Reserve eased following weaker-than-expected U.S. jobs data and lower-than-expected producer and consumer price readings. However, equities reversed course towards the end of the month amid renewed inflation concerns, geopolitical tensions, and a rise in U.S. government borrowing costs to multi-year highs.
In fixed income, the U.S. Treasury market experienced a severe structural sell-off, with long-dated Treasury yields surging to their highest levels since 2007. The move was driven by a combination of concerns over rising U.S. government debt, geopolitical tensions, and expectations of a hawkish Federal Reserve. In foreign exchange, the U.S. dollar continued to weaken against a basket of currencies, reflecting uncertainty over whether the Fed will raise interest rates in September.
In commodities, gold and silver prices surged to multi-month highs, supported by a weaker dollar, growing concerns over U.S. debt levels, and increased Treasury bond buybacks. Elsewhere, crude oil prices remained highly volatile amid acute geopolitical tensions, severe maritime bottlenecks, and a growing mismatch between supply disruptions and weakening global demand. Wheat prices also reached a three-year high amid escalating Russia-Ukraine tensions in the Black Sea, which have disrupted grain exports.
Sub-Strategies and Constituents in the NHX CTA Index
Nordic trend-followers ended the month of August in positive territory. Estlander & Partners Alpha Trend, Lynx, SEB Asset Selection and Calculo Altus were all deep in the green, largely due to profits in currencies, stock indices, and metals, respectively. Mandatum Managed Futures was flat, as gains in equities were offset by losses in fixed income.
Most non-trend-following managers in the NHX CTA Index also posted positive returns. Both short-term trading vehicles, Epoque and Lynx Constellation, generated positive performance, mainly due to profits in commodities and stock indices. All macro-oriented strategies, Estlander & Partners Freedom, Volt Diversified Alpha, and Lynx Systematic Macro, performed strongly and were among the best-performing strategies in the group. Multi-manager program RPM Evolving CTA Fund was down, as gains among the underlying managers in stocks and currencies were outweighed by losses in soft commodities.
Outlook
For now, the global macro outlook remains positive. Recent signs of weakness in the U.S. economy, including disappointing nonfarm payroll figures, have eased concerns about an imminent rate hike and helped support broader market sentiment. At the same time, the AI trade appears to be gradually losing momentum, while elevated government debt has emerged as a growing concern. Together, these developments could mark the beginning of a new and potentially more favourable trend environment.
