Going forward, our stance remains defensive on equities, in particular on European, Japanese and EM markets
(UW). In the space of alternative strategies, we prefer Market Neutral L/S vs. Directional L/S, despite the fact that the
latter has adopted a cautious stance in portfolios and was quite resilient in August.
A spectacular momentum crash unfolded since late August, caused by the bounce back in sovereign bond yields.
Within equity markets, value stocks experienced an impressive rebound while momentum stocks fell strikingly.
Despite colossal headwinds related to trade tensions, the Brexit deadlock and the manufacturing recession, asset prices have been incredibly buoyant so far this year. Equities are recovering from the August drawdown and are
approaching late-July record levels.
According to our estimates, CTA and Global Macro strategies have so far extended their winning streak in July. While we recently talked about the reasons for the outperformance of CTAs (+9.3% year-to-date), the performance of Global Macro strategies is a bit more ambiguous, due to the elevated dispersion between strategies.
With only about 12% of the distressed debt maturing within the next two years, liquidity pressure is likely to remain
benign. Meanwhile, the number of issuers seeking a maturity extension, amendments or waivers to their financial
covenants remain tame.