Dynamic Alpha Macro Fund (DYMIX): June 2025 Overview

This Month’s Performance

June was a strong month for the Dynamic Alpha Macro Fund, underscoring the advantages of our dual-strategy framework. The fund delivered a monthly gain of 4.78%, outperforming the S&P Target Risk Balanced Index (3.42%) and nearly matching the performance of the S&P 500 Index (5.09%). Key contributors included long positions in the 2-Year Treasury, British Pound, Silver, Copper, Oil, and strategic equity exposures, reflecting our ability to generate returns from diverse, non-correlated sources.

Although certain positions, including longs in Gold, Japanese Yen, and Natural Gas, and our short in the E-Mini S&P 500, detracted modestly from overall returns, our diversified global macro positioning allowed us to manage risk effectively while capitalizing on specific market opportunities. This month’s results further highlight our fund’s capacity to deliver diversification without compromise, providing equity like returns with low correlation to traditional asset classes.   

Contradictory at first glance, but an ultimately coherent portfolio

Investors naturally tend to have a core view and then place a set of trades that are all holistically consistent with that big picture viewpoint.

Our portfolio appears to be contradictory from a top-down perspective. We’ve written about this in a past letter, but it’s an idea that’s worth expanding upon.

We are:

• Bearish large cap U.S. equities
• Bullish front-end rates
• Bullish heavy CapEx commodities (natural gas, crude oil, copper, silver)

The first two benefit from a U.S. economic downturn/recession. The latter set benefits from continued global growth. Normally, if you had a top-down view that the U.S. was headed for a downturn, you would want to be short energy and metals. In the previous three recessions – excluding Covid in 2020 – over the past 40 years (1991, 2001, 2008) commodities went down in sync with the U.S. economy.

We’ve been early to the U.S. downturn theme, as real wage gains, COVID stimulus, and fiscal spending have elongated this cycle. Yet the signs of a true slowdown continue to show up in the data.

First, construction spending, a leading indicator, is finally slowing. This is observed in the consistent drop in the bars at the right side of the chart below:

Source: U.S. census bureau via St. Louis Fed

Second, signs of weakness in the labor market – the only thing that matters when thinking about the Fed’s reaction function – keep piling up. Below, initial claims (blue line) are erratic and not offering any sort of ‘signal’, but continuing claims (white line) have been trending higher for a few years and have accelerated since March of this year:

Source: Bloomberg

Continuing claims are the canary in the coal mine: hiring freezes and it becomes tough to find a new job once laid off in the lead up to recessions. We’ve written before that once initial claims are rapidly rising it’s too late to short equities – the stock market will already be down -30%.

Thus, traditional macro analysis would lead you to a portfolio of short stocks, long bonds, and short commodities.

Yet, when we conduct our analysis from a bottom-up perspective and identify each individual trade on its own merits, we come up with a portfolio that looks like an amalgamation of recession and growth trades smashed together.

It could be that we are wrong about a U.S. downturn and we’ll have to adjust our equity and fixed income positioning. Or perhaps we’ll be proven correct on the U.S economy and commodities break down, forcing us to liquidate those latter trades.

Although it may not make sense on a ‘first level’ sort of framework, there is a third possibility: that the U.S. has a recession and for the first time in decades, global commodities break higher on tight supply balances and resilient global (ex-U.S.) growth.

Positioning through June

We added a few trades in June and have a full portfolio. Instead of recapping our usual high-level supply and demand analysis on each position, we’ll assume the reader’s familiarity with the main drivers of each market and attempt to push back on where we think the conventional analysis on each market is wrong.

Crude oil

Conventional thinking is that OPEC+ is opening the taps to punish Iraq and Kazakhstan, adding 411,000 barrels per day back to the market, hence creating an oversupplied market. Our view: the 411,000 was already in the market as supply and OPEC+ simply acknowledged that reality with their new supply targets; the physical oil market is fairly tight with low inventories. Ignore Israel/Iran theatrics as they generate short-term, highly volatile moves but don’t change the deeper, multi-year picture.

Natural gas

We covered gas in our previous letter. The conventional analysis is that gas in the U.S. will remain plentiful forever, given that’s been the case for the past 15 years. Yet the shale basins (supply) have begun to finally give out just as LNG exports (demand) ramps up. That doesn’t even account for domestic power demand, which is inflecting higher after no growth for 20 years. 

Copper

Conventional thinking is that China’s property bust means copper demand stays weak. Our view: China’s ravenous demand for copper for ‘new energy’ investments in EVs, solar, and data centers are more than offsetting the lost demand from property – no new investment in primary copper extraction leaves this market tight for years to come.

Silver

Conventional thinking is that silver is a dud investment as “poor man’s gold”. Projected supply deficits over the last 20 years never materialized as previously mined physical silver always came out of the woodwork every year there was a deficit. Our view: silver’s industrial demand has gone up from 55% of mine supply to 80% over the past ten years as solar photovoltaics drive incremental demand; there is no quality substitute. The deficits are finally real this time and since silver is mined as a by-product of gold, copper, and zinc, it’s hard to ramp up dedicated supply.

Gold

Speculative positioning is light in gold, indicating that most hedge funds view the gold market as very overbought and due for a correction. Based on any reasonable form of technical analysis, we agree! But what’s strange is the complete failure of this market to offer an ideal entry point, staying overbought for longer than it has in the past. Central banks are buying every dip to diversify their reserves. This market could fail to let the broader hedge fund community enter and stay overbought all the way up to $5,000 an ounce or higher before a true, meaningful correction takes place.

2-year Treasury notes

The conventional view is that the Fed must hold rates at 4.5% or even raise them if inflation from the tariffs gets sticky and CPI heads back above 3%. Our view: tariffs are more likely to be passed through as a tax on most U.S. consumers, further slowing down growth. With hiring broadly frozen, the labor market is finally at risk of the typical feedback loop in a downturn; the Fed may end up cutting rates more than what is priced into the forward curve.

U.S. dollar

Conventional sentiment analysis points to short U.S. dollar as a crowded trade, with every major allocator ostensibly already max bearish USD. We often fade the consensus view; this is a case where we don’t see that as the correct course of action. Large allocators may respond to banking surveys by describing ‘short USD’ as a highly consensus trade, but their actions speak differently. We doubt pensions and other meaningful pools of capital, where boards meet quarterly and make decisions slowly, have even begun the process of changing their allocations. The dollar may consolidate for a few weeks or even a few months, but the next major move in currencies looks to be a lower dollar. We remain positioned long GBP vs USD and long JPY vs USD.

S&P 500

Lastly, we closed our short position in the S&P 500 as it hit our risk point mid-month. We are very much bearish on U.S. equities, with a view that both multiples and margins will eventually contract. However, we do not fight the tape, and with the stock market continuing to act bullishly and hitting new all-time highs, we will simply step aside and wait and watch for a better opportunity to try this trade again.

As always, we continue to be nimble. If the data and/or our views change, we can pivot our positioning and find other trades within the 40+ markets we have available. This is also why we maintain a strategic allocation to U.S. equities in our overall fund strategy, balancing a buy-and-hold approach with active global macro long/short positions. 

We Are Here To Help

We appreciate your continued trust and partnership and look forward to updating you on our progress in the coming months. Please feel free to reach out if we can provide additional clarification on specific ideas or the portfolio more broadly.

If you are a financial advisor and would like more information on our multi-dimensional approach towards asset management, you can download our white paper titled Busting Seven Risk and Return Myths by visiting our website at DynamicWG.com, or email us at info@DynamicWG.com. If you are an individual investor, we are happy to address any questions you may have and put you in touch with a qualified advisor, if so desired.

** In 2022 Liz Truss, Britain’s Prime Minister, announced a “mini-budget” that included unfunded deficits that no longer seem outrageous in hindsight, particular given the U.S. deficit in recent years. However, it happened to be the proverbial “straw that broke the camel’s back”, and the pound plummeted while U.K long-end rates screamed higher. Truss had to backtrack quickly and was out of office a few weeks later.