The CTA sub-index of the Nordic Hedge Index finished November in negative territory, largely due to losses in equities as tech-sector jitters and doubts about the Federal Reserve’s commitment to further rate cuts sparked a pronounced mid-month reversal. Performance among Nordic CTAs was mixed across managers and sub-strategies.
Last month, time series momentum (TSMOM), as measured by RPM’s Market Divergence Index (MDI), dropped below long-term average levels amid multiple reversals in financial markets. In equities, tech shares led a major slide in U.S. stocks as rising concerns about stretched valuations collided with growing doubts about whether the Fed would continue cutting rates. In fixed income, U.S. bond yields also reversed course, trending lower on the back of easing inflation and Fed officials’ comments that boosted the odds of a December rate cut, despite mixed labor market data and macroeconomic uncertainty. In FX, the U.S. dollar remained rangebound, responding to changing interest rate market expectations.
In commodities, gold prices initially fell after Fed chair Powell had dimmed hopes for such a cut but rebounded later on reassuring comments, finishing the month in positive territory. Elsewhere, petroleum prices were under pressure from rising production and a potential for increased supply from Russia if peace talks with Ukraine would succeed. Finally, soybean prices moved higher, supported by lower production forecasts and decreased U.S. ending stocks. The cryptocurrency market experienced significant volatility and a painful correction, driven by macroeconomic uncertainty and large liquidations.
Sub-Strategies and Constituents in the NHX CTA Index
Most trend-following managers in the Nordic Hedge Index ended the month in negative territory, primarily due to losses in equities. Estlander & Partners Alpha Trend, Lynx, Mandatum Managed Futures, and SEB Asset Selection were all down on the month. Commodity-only manager Calculo Evolution Fund, however, managed to post a positive return, benefiting from its narrower focus and avoiding the jitters in financial markets.
Looking beyond the more traditional trend-followers, the remaining constituents of the CTA sub-index within the Nordic Hedge Index delivered mixed results in November. Among short-term traders, both Epoque and Lynx Constellation finished the month in positive territory. In the macro-oriented segment, Estlander & Partners Freedom and Lynx Systematic Macro were down, while Volt Diversified Alpha Fund generated a positive return driven largely by gains in commodities. The multi-manager program RPM Evolving CTA Fund also ended the month down, as its underlying managers were unable to offset losses in stock indices.
Although macro uncertainty remains high and will remain so until official statistics are up to date, there is no sign of an economic slowdown in the U.S. Nevertheless, the Fed is expected to deliver at least one more rate cut. For now, the trend environment has taken a breather, experiencing the expected setback before Christmas.
