Energy Rally Stumps Short Sellers
February was a tough month, to put it mildly. Signs of a worldwide economic contraction appeared almost everywhere. For managed futures, the results from different databases vary. Commodity trading advisors as a group had small losses according to most indexes, but one database actually shows a gain (table below). Hedge funds generally declined more significantly and of course stock market losses were in the double digits. Gold was a winner.
A report from Credit Suisse says:
In addition to global equity markets struggling, consumer sentiment, jobless claims and home sales all worsened in the first two months of 2009, with signals that the US economy could contract another 6% in the second quarter of 2009 before the government's $787 billion stimulus package is felt. Faced with this difficult macro data, global macro and managed futures managers generally held their own, taking advantage of opportunities in currencies and exploiting divergences between governments' monetary and fiscal policies globally via core fixed income trades.
Oil was the joker in the pack, gaining 7.4%. Certain commodity prices tracked the economic downturn, rewarding short sellers. But many CTAs were short energy, so the unexpected rise in energy caused losses. The Credit Suisse report draws a mixed picture:
Most medium and long-term trend followers posted positive returns. Most of the gains were from short positions on equities and grains, as markets sold off by 10% or more during the month due to the weakening global economy. Managers also profited from long US Dollar positions versus other currencies. The gains in equities, agriculture, and currencies were partially offset by losses in shorts in energy as major energy prices rallied during the last week of February. Managers seem to be reducing their long bond positions and adding to currencies and commodities.
February Returns, Selected Asset Classes and Indexes