Q1 was a volatile quarter where the Russian Ukrainian War created large moves in commodities and strengthened the pre-existing inflationary trends. While Developed Equity Markets generally shook off the sanctions imposed on Russia, Fixed Income and commodity markets continued to price in further inflation.
The first quarter was a mediocre quarter for most Hedge Fund strategies, with the exception of CTAs that managed to deliver above-average returns due to the strong performance of commodities and weak performance of the Fixed Income market. US Equity market delivered a rare, but modest, negative quarter resulting in negative performance for strategies correlated to equity market risk premia.
For our database, we have captured 1300+ strategies for the month of March. This should give us relatively high confidence in the general direction of most strategies. Crypto Traders had a good month, but are generally down for the year.
Trend Followers have generated strong performance during Q1, mostly driven by Energy and Agricultural Commodities. Moreover Bond markets that have sold off, as markets have repriced for further inflation contributing to strong results. Here, we use a model developed by 40in20out to get a good read for the markets that have been friendly to trend followers.
From the chart above, it is clear that Trend Following CTAs are one of best performing strategies year-to-date, with most other strategies comparatively flat for the year. The result for March is one of those positively skewed months that CTA allocators have been waiting for.
2022 will continue to deliver strange narratives and complicated market moves. As a final remark, we note that the Google searches for stagflation reached a peak in March while searches for unemployment related terms continued to trend lower. The two narratives cannot be true simultaneously.
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