A better than expected February jobs report accompanied by a mixed wage growth picture dampened inflation expectations and allowed for an albeit shortlived recovery for Polaris after a challenging February. The Federal Reserve raised the target rate by 25 bps as expected and expressed an upbeat economic outlook at mid-month. Treasury yields continued their upward trend the first half of March, courtesy of diminished demand from overseas buyers due to a weaker dollar. However, at mid-month yields began to fall over concerns of a potential global trade war. Equity markets were not immune to the trade concerns either and were kept on edge by the banter, reversing the positive momentum garnered earlier in the month and resulting in Polaris down -1.92% (net).
The commodity sector was up +0.28% (gross) this month. Polaris maintained long positioning in the energies and metals subsectors going into March. The NYMEX Crude Oil chart highlights that energy prices, though choppy early on, resumed their upward trend from February mid-month, which contributed to the positive return.
The currency sector was down modestly -0.11% (gross) this month. Polaris continued to maintain short dollar positioning throughout the month. The ICE Dollar Index chart below indicates a sideways market with no real trends that could be exploited by our models.
The equity sector was down -2.55% (gross). Equities were our worst performing sector for a second consecutive month. Polaris maintained long positioning in equities owing to the intermediate to long-term bullish trend overall. As can be seen in the E-Mini S&P 500 chart below, February’s rebound in the equity markets was short lived and the month ended close to 2018 lows.
The Interest rate sector was up +0.45% (gross) this month. Polaris entered the month net short for long-term rates globally and held bearish positioning in US short- and mid-term instruments. Conversely, the portfolio was net long mid- and short-term rates in Europe. As can be seen in the price charts for the US 10-year note and the Euro-Bund below, the bullish positioning in the European positions boosted the program into the positive and helped deflect some modest losses from the bearish US positions.