Markets remain focused on the evolution of vaccination around the world and the support provided by Central Banks and Governments. Thus, the ābuy the dipā mentality remains fully in place.
The biggest concern right now is the increase in yields. Even though it is difficult to reconcile low yields with higher inflation expectations, we think the Central Banks will be able to cool down the increase in yields somehow, so the stock market does not panic. In any case, we think a correction would be healthy and if markets keep rallying without significant corrections, it will be deeper when it comes.
Investors should keep close attention to developments in credit markets. There are some spots of distress which are being ignored by now but could be the trigger of a sudden increase in volatility if investors start to focus on them. Given actual valuations and ERP we think earnings would be the only driver of higher equity prices. Short term we could see equities performing well. Longer term we have serious doubts.
February was a month with a lot of rotation within the portfolio, which led to a +2,23% contribution from closed trades. At some point we witnessed some extreme levels in certain pairs (i.e., AUDUSD or NZDJPY) while a correlationĀ“s divergence was showing up. That led to a sharp turnaround which our model took advantage of, locking in some profits and reducing risk.
In general, prices keep moving against our main positions, which remain tilted to defensive or ārisk-offā. After being mostly long GBP during the last few months, the continuous strength is starting to show good short opportunities. Thus, the portfolio enters March with a net short position in GBP.
On the other side, continuous weakness in JPY has meant an increase in the long exposure. We would like to stress that current extreme level are close to the ones witnessed during March last year. The drawdown now is much smaller though, but the current information ratio is one of the best we have seen since inception more than 7 years ago.
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