Equities continued the move up, helped by the beginning of vaccination. Meanwhile, house confinements are spreading across several countries and another recessive quarter looms in Europe.
Equity valuations look very expensive, but market argument is that they are fairly priced when compared to bonds. Our thought is that if bonds are extremely expensive and equities are fairly priced to bonds, then equities are extremely expensive as well, but we reckon that investors have no easy choice and are jumping into equities no matter what.
We feel this is a dangerous investment environment where a huge misallocation of capital could be taking place, and which could provoke yet another crisis. The only assets that that are not performing well in this environment are long term US government bonds and the USD. Any pull back in the reflation trade could see both rallying in the short term.
Continuous USD weakness and AUD and NZD strength weighted negatively during the month and we are in the middle of a typical drawdown.
To put it in perspective, the AUD and NZD up movement is as extreme as was de down movement in March, but the current drawdown is of around 5% instead. This does not mean the potential has diminished, on the opposite, actual information ratios are the best we have ever seen. Meanwhile, close trades contributed 2% during the month, and this is the 9th month in a row at the same pace.
We finish a tough year were our portfolios end negative for the first time, but the recovery from the trough in March was 20% (100% for the x3 version) even as market moved against our main positions most of the time. 2021 starts plenty of good opportunities in different currency pairs, so we are optimistic going forward
Below we show you the October cards of all our funds.
As always we remind you that we are at your disposal for anything you may need.
This document is provided for informational purposes only and cannot be considered in any case as a contractual element, a recommendation, personalized advice or an offer. Nor can it be considered as a substitute for Key Information Document (KID) or any other mandatory legal information that should be consulted prior to any investment decision. In case of discrepancy, the legal information prevails. All this legal information is available at the offices of Grantia Capital SGIIC, SA and on its website: www.grantiacapital.com