November Already? - Tune Capital AG

Article by Oliver Gomm

November already. Where did the year go? Can we evaluate the year yet? Probably too early.

The holiday season, about to begin, but some feelings linger, there are some more twists and turns still to come. Our focus is: protect our wins from here until the new year, and only deploy capital further if the right opportunity arises. But, Opportunity does not always respect the calendar! We need to take the opportunities when they arise, not when it suits us.

Performance in the market

Thanks to the activity of the various central banks around the world, FX markets have moved in identifiable waves, albeit with a general theme of devaluation of the US Dollar. Stock markets in the US have risen higher on cheap money. Money will always find a home, and where?

Well, it will follow which assets have performed well recently.

Humans love to take a shortcut and follow trends. Stock markets are overvalued, who cares? The market doesn’t lie, “let’s buy the S&P500 index, our superiors, stakeholders will understand why – surely?”
FX markets have also enjoyed trends. The US Dollar has depreciated against a basket of other currencies. and we have been fortunate enough to follow and book profits this year as a result.
Trends continue, until….well until they don’t! Stock markets will correct and trend in the other direction and usually, this unwinding happens quickly.

Having in mind

Many analogies come to mind, about everyone looking to exit through the same door at once…Black Monday is how the newspapers react in the aftermath.

Our models in the FX market are not perfect – nothing is – but we do get a flavor for when trends are over. Finished…With analysis of different time periods and understanding of moving averages on different trading volumes. When to have a large position, when to have a small position, and when to have no position at all is our conclusion. When we are right? when we are wrong? These are vital questions to answer, because their answer determines our profitability, and thus the rate of return delivered to our investors.

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Oliver GOMM