Macro rises like the proverbial phoenix

We are now nine months into this extraordinary year and so far there doesn’t appear to be any let up in the dire macro environment, Alastair Crabbe writes.   

Geopolitically, Russia gets more entrenched and in August we had an aggressive China flexing its muscles over Taiwan.  

Europe’s winter looks desperate with sky high oil and gas prices, and the onset of a hideous stalemate in the Donbas. 

The repercussions can only be increasingly high inflation and more aggressive rate hikes. 

What we are all going through, globally, has been described as this generation’s Cuban crisis, but it feels a lot more dangerous. The stakes are certainly massive, with Putin playing a very real game of Risk, by goading the West, playing with people’s lives and weaponising energy. 

Such a disconnected world continues to be fertile hunting ground for the macro manager, although positioning can at times be hazardous and less directional than it was earlier in the year. You saw this during the summer, with the bear market rally catching various managers out. But dig deeper and there was little substance behind it, beyond hope. As Isaac Souede mentioned in a previous edition of the The Hedge, bear markets are punctuated by rallies, but they are still bear markets. 

Yet, it was not very long ago that commentators were reading the macro strategy its last rites after years of sub-optimal performance.  Now their long-term performance looks absolutely stellar, particularly systematic and more commodity focused managers, and it is interesting to see US energy traders now looking to set up shop in Europe where they see the action.  

Macro managers are firmly in the right place and even if Russia and China do step back from the brink, and it currently doesn’t look likely, it is going to take many years to return to the status quo of yesteryear.