Insights

August commenced with significant volatility, as the July US employment report fell short of expectations, igniting recessionary fears. This led investors to price in as many as 125bps in rate cuts by the Fed before year-end. The dollar slipped and equities tumbled as worries about the performance of the US economy overshadowed the potential benefits of lower borrowing costs. Initially, the yen was the biggest gainer, as traders unwound the previously overcrowded carry trade.

That said, subsequent data releases alleviated recession concerns, rekindling risk appetite. Equities rebounded, while the risk-linked kiwi and aussie staged remarkable rebounds. Nonetheless, a dovish speech by Fed Chair Powell at Jackson Hole did not materially alter investors’ projected rate path, resulting in the dollar’s continued underperformance. The euro and the pound hit fresh highs, with the latter receiving an additional boost from the BoE’s cautious start to rate cuts. Gold hit a new record high, buoyed by aggressive Fed rate cut bets and escalating tensions in the Middle East.

The IXI Fund saw considerable gains despite the market turbulence in early August, as economic data and participants’ reactions drove up volatility in traded instruments. Despite the precarious environment, our strategy performed well, securing significant profits in the first half of the month. The second half was marked by more subdued activity, with only a minor impact on profitability, as most days ended with small net losses or gains.