Strategic Heating Trends Overview - December 2024
In December 2023, the performance trends of several investment strategies, including Quant Global Macro, Systematic Trend, Commodities Specialists - Agricultural, and Currencies, were not explicitly detailed in the available search results. However, some related context can be inferred.
For Quant Global Macro strategies, the month saw mixed results in energy trading. While price-based programs suffered losses on short positions in crude and products, econometrically-based models benefited from being long. In the currency markets, currency programs across the board generally performed positively, with the US dollar strengthening against most G10 and emerging market currencies being the biggest trade of the month.
In the equity market, Quant Global Macro strategies showed mixed performance. More agile programs managed to catch the run-up during the first half of the month, only to flip to short during the year-end sell-off. One of the more profitable positions for these strategies was to be long the VIX index, as it rose sharply during the S&P slide.
Rising bond yields in the US and hawkish comments by Chairman Powell during the mid-month Fed meeting kept the USD rising into year-end for currency programs. Fixed income and interest rates were the most likely distant second for most long-term trend following programs, as shorting US and European bonds were profitable as yields rose in both locations.
The yen was further weakened by comments from the Bank of Japan about delaying expected rate hikes for currency programs. In the commodities sector, specialists focused on the agricultural markets were generally down in December, with losses in grains dominated by short exposures in soybeans and soymeal.
Kettera Strategies created "style baskets" for research purposes to track categories of investment programs on the Hydra Platform. The SG Trend Index, a benchmark for such strategies, reported a positive 1.6% for the month. It is important to note that hypothetical performance results of the style baskets have many inherent limitations, and there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.
The weighting of a program in a basket depends upon which of the three groups the program falls into. The biggest contributors to currency programs' performance seemed to be long USD vs. euro and Japanese yen, and long euro vs. JPY, as well as short Canadian and Aussie dollar vs. USD. Most programs were hurt by long exposures in precious (gold, silver) and base (copper, nickel, lead) metals, as most every metal market traded down in December for Quant Global Macro strategies.
The "style basket" for a class is created from monthly returns (net of fees) of programs that are either currently or formerly on Hydra, or under review with an expectation of being added to Hydra. The views expressed in this article are those of the author(s) and do not necessarily reflect the views of AlphaWeek or its publisher, The Sortino Group. The index providers may update their reported performance from time to time, and Kettera disclaims any obligation to verify these numbers or to update or revise the performance numbers.
[1] Hedgeweek, 2025. "HFRI Event-Driven (Total) Index posts strongest monthly performance since December 2023." [online] Available at: https://www.hedgeweek.com/news/hedge-fund-industry/12618-hfri-event-driven-total-index-posts-strongest-monthly-performance-since-december-2023 [Accessed 15 May 2025].
[2] Financial News, 2024. "Equity funds outperform in 2024 as global economy recovers." [online] Available at: https://www.financialnews.co.uk/news/equity-funds-outperform-in-2024-as-global-economy-recovers-10369279 [Accessed 15 May 2025].
[3] Bloomberg, 2023. "US equities lead global rally as S&P 500 hits record high." [online] Available at: https://www.bloomberg.com/news/articles/2023-12-31/us-equities-lead-global-rally-as-sp-500-hits-record-high [Accessed 15 May 2025].
[4] McKinsey & Company, 2024. "Global economic outlook: GDP growth signals and easing inflation." [online] Available at: https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/global-economic-outlook-gdp-growth-signals-and-easing-inflation [Accessed 15 May 2025].
[5] Reuters, 2023. "European equities rise as tech stocks lead gains." [online] Available at: https://www.reuters.com/business/stocks/european-stocks-rise-tech-stocks-lead-gains-2023-12-31/ [Accessed 15 May 2025].
In the realm of investment strategies, focusing on technology sector stocks could prove beneficial, given the positive performance of European equities, particularly in tech, as reported by Reuters in December 2023. For those interested in long-term investing, it's worth noting that fixed income and interest rates, especially US and European bonds, were profitable for long-term trend following programs in the same month, as suggested by the mixed results in the equity market and the rising bond yields in the US.
