Discretionary Trading Q3 2017 Commentary

Instruments traded:FX Spot and CFDs
Asset Classes:FX, Equity Indices, Commodities, Government Bonds
Investment Style:Discretionary (non-systematic), Volatility, Opportunistic
Quarterly Return:-3.42% (gross of service or any applicable performance fee)
Q3 2017 daily return volatility:0.94%
Average Trades per week:12.2 (since inception)

Market Overview

Stock markets continued their quiet bull run in Q3, with historically low volatility and unprecedented lack of corrections. The year to date return of S&P500 index approaches 15% with a maximum drawdown of roughly 3%. A year without a correction bigger than 3% has never happened before in history. To date the equity market is shaping up to be a classic bull market year but with conditions only advantageous for a long only, buy and hold investors. The bull run was punctuated by worries of nuclear war with North Korea and also with a correction in technology stocks at the beginning of a quarter, but it has otherwise been a steady environment for stocks.

Notable developments in forex markets included a rise in the Euro and U.S. dollar weakness, which was curiously detached from the Bund-U.S Treasuries spread. This brings the Strategy Manager to the conclusion that the Euro rise is unrelated to expectations of policy change by ECB or Fed, but comes from long term prospects of growth and political risk assessment in Europe. The end of the U.S. Dollar's weakness coincided with China's Fx regime change and the peak of geopolitical worries.

Bond markets incurred a rise in yields, driven in part by Draghi’s Sintra speech and also rising geopolitical risk, until yields rebounded into September-end, resulting in flat performance during the quarter. Oil market remains range bound, whilst gold has followed the movement of U.S. Dollar and there was a rise in price of copper

Portfolio Performance

July-5.4%
August0.7%
September-2.8%

The perceived risks (North Korea headline) and underlying belief of an overdue correction, meant Discretionary Trading did identify strong opportunities in stock markets. Continued attempts to catch a bigger correction in technology stocks meant that the Strategy performance detracted over the quarter.

Discretionary Trading benefited from the rise of the Euro but not to the full extent of a move. It also benefited from a bonds falling at the end of a quarter, mitigating losses incurred earlier in the quarter.

Outlook

In Q4, the Strategy Manager expects some volatility during earnings season in equities and fluctuations in forex and bonds, driven by the nomination of a new Fed Chairman, tax plan visibility in Congress and any ECB decision for QE tapering.

For the longer term and cognisant that the last major turbulence in global economy originated from China, the trajectory of the Chinese economy will play an important role after the Party Congress in October.

Any information found in this document, including performance information and statistics are subject to change. You can find the latest updated pricing information on the description page for each available portfolio. In providing this material Saxo Bank has not taken into account any particular recipient’s investment objectives, special investment goals, financial situation, and specific needs and demands and nothing herein is intended as a recommendation for any recipient to invest or divest in a particular manner and Saxo Bank assumes no liability for any recipient sustaining a loss from trading in accordance with a perceived recommendation. All investments entail a risk and may result in both profits and losses, and all capital is at risk. In particular investments in leveraged products, such as but not limited to foreign exchange, derivatives and commodities can be very speculative and profits and losses may fluctuate both violently and rapidly. Speculative trading is not suitable for all investors and all recipients should carefully consider their financial situation and consult financial advisors in order to understand the risks involved and ensure the suitability of their situation prior to making any investment, divestment or entering into any transaction. Any mentioning herein, if any, of any risk may not be, and should not be considered to be, neither a comprehensive disclosure of risks nor a comprehensive description of such risks. Any expression of opinion may not reflect the opinion of Saxo Bank and all expressions of opinion are subject to change without notice (neither prior nor subsequent).

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