Geopolitical concerns surrounding the on/off/on again potential for a US-North Korean summit, the impasse surrounding the Italian elections and continuing hardline rhetoric regarding tariffs/trade protections held the market’s attention in May. The resulting trading environment included significant trend changing volatility and only the equity sector managed to complete the month relatively unscathed.
The commodity sector was down -1.11% (gross) with the majority of the losses sustained in the agriculture and metals sub-sectors. Polaris began the month with long positioning in energies and metals while short agricultural products. The Gold and Coffee future price charts below show there was a significant reversal in the long-term trends of both markets which contributed to the poor May showing in this sector. This shift was also captured in the TNR, which dropped close to its lowest point thus far this year.
The currency sector was down -1.00% (gross) hurt by the program’s generally short US dollar (USD) positioning heading into May. The Dollar index futures price chart highlights the strong reversal in USD from the long-term bear trend which preceded. The medium- to long-term nature of our holding periods prevented us from capturing the sudden reversal.
The equity sector was flat -0.02% (gross) and the program maintained its essentially global long positioning throughout the month. While Asia and Europe sub-sector trading sustained losses, North American equities (as represented by the E Mini S&P Index price chart) rallied enough in the first half of May to neutralize the setbacks offshore and were the best performing sub-sector this month.
The interest sector was down -0.37% (gross) and, as seen elsewhere, experienced a significant change in the general (in this case bearish) trend which, again, made trading here difficult to navigate this month. The price movement in the CBOT 10-year Note futures perfectly demonstrates the furious reversal which occurred. This change of course was also captured in the TNR, which fell close to its 2018 lows.