April 2023 comment

Our fund supplied a fourth consecutive month of gains in as many months for 2023, with April economic data showing growth holding up on the back of robust service sectors which in turn are keeping core inflation figures sticky above 5% on both sides of the Atlantic. China’s first quarter GDP print also came in stronger than expected, positive developments that served as a counterweight to a still jittery banking situation in the US, whose credit crunch aftershocks are starting to creep into bank lending surveys.

Agricultural trends continued to perform strongly both on the long and short side, with their idiosyncratic nature a welcome contribution towards diversification. Sugar’s high proceeds unchecked, as late harvests continue to weigh heavily on supply this year.

Our carry plays in Latin American currencies also continue to benefit on the back of their stable monetary policy and high real yields, whilst our recent preference for lower growth beta currency crosses in developed markets profited in April as the Korean Won and Norwegian Krone exhibited weakness versus the dollar.

Going into May, we see our macro indicators still favouring the US dollar versus major economies – our net long increasing again compared to March – while we have been trimming down our European bond shorts as we don’t agree with the present decoupling priced in between the US and European forward curves.