DYMIX Summary for October 2023

Welcome to the monthly summary of the Dynamic Alpha Macro Fund (DYMIX). This October, we continued to capitalize on our dual-strategy approach, which blends the robustness of a fundamental global macro strategy with the steady performance of a U.S. equities portfolio. Crafted with a meticulous focus on risk management, this combination embodies our pursuit of generating “Dynamic Alpha” in the face of volatile market dynamics. 

Our overall allocation this month continues with approximately 50% directed towards U.S. Equity ETFs, with the balance invested in a global macro futures strategy and short-term fixed income. With the global macro strategy in play, we’ve achieved long/short exposure across varied and non-correlated markets, from metals like gold and silver to diverse currencies, commodities, and financial indices.

To dive deeper into the specifics and our macro-observations, especially our recent venture into the crude oil market, continue reading below. From historical insights to supply-demand analysis, this update offers a comprehensive view of our investment strategies and market outlook.

Thank you for being part of the Dynamic Alpha journey. We are committed to keeping you informed and ensuring our strategies align with the ever-evolving financial landscape.  With that in mind, as always, if you have any questions, feel free to contact us at info@DynamicWG.com.

MONTH END PERFORMANCE METRICS as of 10/31/2023

NAVOne MonthSince Inception*
Dynamic Alpha Macro Fund9.451.50%-5.50%
S&P 500 TOTAL RETURN INDEX-2.10%-8.25%
Gross Expense Ratio is 1.99%.

QUARTER END PERFORMANCE METRICS as of 9/30/2023

NAVOne MonthSince Inception*
Dynamic Alpha Macro Fund9.31-5.96%-6.90%
S&P 500 TOTAL RETURN INDEX-4.77%-6.28%
Gross Expense Ratio is 1.99%.


* Fund inception was 7/31/2023.
Performance data shown represents past performance and is not a guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Updated performance information and daily net asset value per share (“NAV”) is available at no cost by calling toll-free 1-833-462-6433.

PORTFOLIO OVERVIEW

Dynamic Alpha pie chart titled 'Overall Allocation' shows the percentage breakdown of an investment portfolio. The largest segment, at 50%, is allocated to 'Core Equities,' colored in turquoise. 'Cash' is the second-largest at 18%, in dark blue, followed by 'Growth Equities' at 17%, in pink, and 'Dividend Equities' at 13%, in purple. A smaller segment represents 'Global Macro' at 2%, in light green. An inset pie chart titled 'Global Macro' details its composition: 56% in 'Gold,' colored magenta; 24% in '2-Year Treasury,' in orange; 7% in 'Short Nasdaq,' in teal; 4% in 'Swiss Franc,' in dark grey; 7% in 'Silver,' in light blue; and 2% in 'Short Sugar,' in yellow.

Contributors

Long: Gold & Silver
Short: Nasdaq


Detractors

Long: Crude Oil, Equity ETFs, Swiss Franc, & 2-yr Notes
Short: Sugar


Current Positions

Long: Gold, Swiss Franc, Silver, & 2-yr Notes
Short: Nasdaq & Sugar

MACRO OBSERVATIONS

In the past, we’ve spoken at length about our views on bonds, equities, and gold. So, while we will touch on those briefly before closing this letter, we’ll spend more time on a new position that we initiated mid-month before closing it in late October: long crude oil. Even though the position is no longer in the portfolio, we follow the oil market closely and plan on continuing to invest in this market in the future actively. What follows is a quick primer on the oil market before we discuss our recent trade and our bigger-picture views.

Crude Oil

Looking at the oil market is timely due to the outbreak of war in the Middle East. Let’s start with a quick historical context before we break apart the supply and demand for oil today.

History

Supply

Demand

Our Oil Trading Approach

Illustration of a bull and a bear facing each other with a backdrop of financial charts and oil barrels. The bull, symbolizing market growth, is tinted with orange, representing rising stock prices, while the bear, representing market decline, is tinted with blue, accompanying falling stock prices. The background includes stylized bar charts and oil barrels, indicating Dynamic Alpha performance.

Let’s quickly address the long oil trade that we placed in early October and which we closed near the end of the month. While economic outcomes are inherently uncertain, our overall assessment of the global economy is that we are set for a hard economic landing, an outcome at odds with the “soft landing” narrative that has become prevalent. Our base case was, therefore, somewhat bearish on oil, given that a recession could easily negate the 20% rally that oil has had from July 2023 – September 2023, a rally driven by OPEC+ supply cuts.

The outbreak of war in Israel allowed us to put on a defined-risk, tactical trade. Our calculus was that oil would not move much based on any military action by Israel to go after Hamas. But any escalation in the region that directly involved war between the U.S. / Israel against Iran, whether that led to the closure of the Strait of Hormuz or otherwise, had the potential to send oil spiking above $100 very quickly. The trade was worth putting on despite being a low-probability event.   We closed the trade ahead of our risk point, as the price action was weak and didn’t reflect the scenario of a wider conflict.

Our long-term view on oil (next 3-5 years) is one where a lack of Capital Expenditure (CapEx) by most large oil companies – and a desire by those companies to return free cash flow to shareholders – will lead to a grinding bull market in oil for years to come.

Therefore, as we look past any coming recession, our investment view is bullish crude oil, just less so than the super cycle folks. Our analysis may lead us to consider establishing a long position in oil futures next year; however, our decision will depend on a continuous assessment of the market’s evolving dynamics.

We continue to expect a hard-landing recession. Our short Nasdaq 100 and long gold positions contributed the most to our October performance. Our long position in 2-year Treasuries treaded water but could be poised to increase in value in the months ahead.  Our current market assessment suggests the possibility of ending Fed interest rate hikes and potential cuts; however, these projections are subject to change based on future economic data and market developments.  In fact, we believe that rate cuts will likely need to be deeper and more aggressive than many think as the lagged impact of Fed rate hikes continues to catch up with small businesses, commercial real estate, and the bottom half of U.S. consumers.

As always, we continue to be nimble, and 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.

OUR GLOBAL MACRO LONG/SHORT INVESTMENT UNIVERSE

EQUITY INDICESENERGYMETALS
E-mini S&P 500
NASDAQ E-MINI
Nikkei 225
Russell 2000 e-mini
MSCI EAFE Index
MSCI EM Index
Crude oil
Natural gas
NY Harbor ULSD
RBOB Gasoline
Copper
Gold
Palladium
Platinum
Silver

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INTEREST RATESCURRENCYAGRICULTURE
10-year Treasury note
2-year Treasury note
30-Year Treasury
5-year Treasury note
SOFR
Australian dollar
Brazilian Real
British pound
Canadian dollar
Euro
Japanese yen
Mexican peso
New Zealand dollar
Swiss Franc
Cocoa
Coffee
Corn
Cotton
Feeder cattle
Lean hogs
Live cattle
Soybean meal
Soybean oil
Soybeans
Sugar #11
Wheat

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CONTACT INFORMATION

If you’re an advisor or investor interested in learning more about the Dynamic Alpha Macro Fund, you can get in touch through the “Contact Us” page on their website at https://dynamicalphafunds.com/contact-us/. Alternatively, you can directly email your inquiries to info@dynamicalphafunds.com.

IMPORTANT RISK INFORMATION

Disclaimers:

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