After two particularly strong months in August and September, the NHX CTA Index took a breather in October, posting a loss as setbacks in bonds outweighed gains in energy and soft commodities. While financial markets experienced several reversals, commodities offered a welcome degree of trend stability. In this challenging trading environment, performance varied across managers and sub-strategies.
Last month, time-series momentum (TSMOM), as measured by RPM’s Market Divergence Index (MDI), fell below its long-term average, primarily reflecting trend reversals in financial markets, while some commodity trends remained intact. In fixed income, US government bond yields initially surged to multi-decade highs before reversing sharply as a selloff in AI and technology stocks, coupled with renewed geopolitical risks, triggered a flight to safety. Global equities, meanwhile, showed considerable resilience, initially rallying despite headwinds from elevated government bond yields, persistent inflation, and rising oil prices, before reversing course and ending the month lower.
In foreign exchange markets, the US dollar surged to an 18-month high in early October before retreating as investors reassessed the Federal Reserve’s policy outlook. In commodities, crude oil prices climbed to their highest levels since April amid an escalation in tensions involving Iran, Israel, and the US. The month also saw one of the highest numbers of attacks on commercial shipping in the strategically important Strait of Hormuz. Elsewhere, global wheat prices maintained a downward trend, driven largely by emerging geopolitical breakthroughs, a stronger US dollar, and larger-than-expected adjustments to domestic supply estimates.
Sub-Strategies and Constituents in the NHX CTA Index
The performance of Nordic trend followers was largely negative. Lynx, Mandatum Managed Futures, and SEB Asset Selection all recorded losses, primarily due to setbacks in financial markets. Calculo Altus finished the month unchanged, as gains in energy markets were offset by losses elsewhere.
The performance among NHX’s non-trend-following managers was mixed, but also negative on aggregate. Short-term trading managers Lynx Constellation and Epoque both struggled amid several intraday reversals in financial futures markets. Among global macro managers, Volt Diversified Alpha ended the month in positive territory, while Lynx Systematic Macro recorded losses. The multi-manager programme RPM Evolving CTA Fund had a relatively strong month, driven mainly by gains in energy and soft commodities among its underlying managers.
Outlook
Although the macroeconomic outlook has cooled somewhat, the inflation picture remains challenging, with price pressures continuing to accelerate faster than anticipated. Against this backdrop, expectations of lower interest rates appear increasingly difficult to justify. Meanwhile, the AI trade continues to show signs of gradually unwinding.
