Dynamic Alpha Macro Fund (DYMIX): November 2023 Overview

Welcome to the Monthly Summary

Welcome to the monthly summary of the Dynamic Alpha Macro Fund (DYMIX). This November, 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, we believe, this combination embodies our pursuit of generating “Dynamic Alpha” in the face of volatile market dynamics.

As a result, 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.

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, if you have any questions, feel free to contact us at info@DynamicWG.com.

MONTH END PERFORMANCE METRICS as of 11/30/2023

QUARTER END PERFORMANCE METRICS as of 9/30/2023

* Fund inception was 7/31/2023. Performance is as of 11/30/2023.
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.

Dynamic Alpha Macro Fund PORTFOLIO OVERVIEW

Contributors

Long: Silver, Gold, 2 Year Treasury Note, Swiss Franc, and Strategic Equity Holdings
Short: Sugar

Detractors

Long: Corn
Short: Nasdaq

Current Positions

Long: 2-year Treasury Notes, Gold, Silver, Swiss Franc, Corn and Strategic Equity Holdings
Short: Sugar

Macro Observations and Market Analysis

Insights on Apple’s Market Position

First, let’s look at two important charts that have caught our attention and help inform our views on the stock market, gold, and Treasuries.

Here’s a chart of the price to sales ratio of Apple:

Source: Koyfin

Apple used to be a growth stock back in 2015/2016 when it traded at 14x earnings and 3x sales. Today, it trades at 33x earnings and 7x sales. What’s amazing is that the company is no longer growing very much, with revenues declining over the past 5 quarters.

Microsoft is in a similar position, with a P/E of 36x and P/S of 12x; together the two stocks make up over 20% of the Nasdaq. A price to sales ratio of 7 or 12x is not normal for the largest of large cap stocks. You only see it at market peaks.

What’s happening today is eerily similar to the end of the dot-com bubble, when investors crowded into Dell, Intel, Cisco, and a few other impenetrable leaders, after so many smaller, more speculative stocks had crashed. At the time, the thinking was that even though pets.com was worthless, an investor could skate unscathed by holding the big names. It didn’t work. Those “leaders” all fell 65-90% in the final leg of the bear market. We are now 2 years into a bear market, and we could easily see the current crop of tech leaders cut in half, which would only take them back to valuations that they enjoyed pre-Covid!

The Nasdaq has rallied, and we’ve covered our short position for now. But clicking one layer below the index itself shows detail that informs where we think things are heading.

Shares Outstanding in GLD and TLT

The other chart we’d like to cover highlights gold ETF outflows and Treasury bond ETF inflows:

Source: National Inflation Association

The yellow line shows flows into the gold (GLD) ETF while the blue line shows flows into the TLT (long duration Treasury) ETF. This is a fascinating look at sentiment between GLD and TLT – over the past 2-3 years investors have been pulling money out of gold and dumping money into longer duration Treasuries.

The Treasury line is truly amazing as normally you see flows into an asset as it performs well whereas these TLT flows are all an attempt to “buy the dip”. The extreme retail flows into TLT are unlikely to be rewarded; most of these investors will either break even or lose money.

Instead of continuing to chip away at buying the 10-year or 30-year Treasury, we believe a better approach is to buy the 2-year Treasury note. We hold the notion that the Fed will cut rates at the front end of the curve during a downturn – as they always have – even if long-end yields do not drop as much as they have during previous recessions over the past 30 years.

One way to visualize this is to consider what the current inverted yield curve could look like in a year’s time. A likely outcome would have the 2-year at 2.5% (down from 5% today) and the 10-year at 4% (down from 4.3% today). That outcome doesn’t do much for bulls on long-term Treasuries. However, it delivers a meaningful return at the front-end of the yield curve, particularly if you adjust the leverage on a 2-year Treasury note position to match the exposure of a 10-year note.

Although it’s just one data point, the massive retail flows into TLT have functioned as one input into helping us change our minds on what part of the yield curve to position ourselves in as we navigate the tail-end of this economic cycle. And the flows out of gold are very bullish from a contrarian standpoint.

Portfolio Update for the Dynamic Alpha Macro Fund

Aside from small positions short sugar and long corn – which we will discuss further in an upcoming letter – our core portfolio remains largely the same. We are long gold, long 2-year Treasuries, and were short the Nasdaq 100 until we removed that position in mid-November for risk management purposes. We’ll look to add to our existing positions on strength in the months ahead and reinstate the short equities trade once the current rally exhausts itself.

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 dynamic alpha macro fund LONG/SHORT INVESTMENT UNIVERSE

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CONTACT INFORMATION for the Dynamic Alpha Macro Fund

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:

• An investor should consider the investment objectives, risks, charges, and expenses of the Dynamic Alpha Macro Fund carefully before investing. The Fund and summary prospectus contain this and other information about the Fund and should be read carefully before investing. To obtain a prospectus, please call 1-833-462-6433 or access online @ https://regdocs.blugiant.com/dynamic-alpha-macro/
• The views, opinions, or advice contained above are solely those of the author and do not necessarily reflect those of Ceros Financial Services LLC or its affiliates. The strategies and/or investments referenced may not be appropriate for all investors, as the appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
• All investment strategies and investments involve the risk of loss. Nothing within this communication constitutes financial, legal, tax, or other advice, nor should any investment or strategy be undertaken without fully understanding all the risks associated with such an investment or strategy. 
• Ceros Financial Services, Inc., member FINRA/SIPC, serves as a distributor of the funds and is a commonly held affiliate of Advisors Preferred. Advisors Preferred and Ceros are not affiliated with the funds’ subadvisor. Dynamic Wealth Group serves as the subadvisor to the Dynamic Alpha Macro Fund.
• The performance figures reported are historical and should not be taken as an indication of future performance. Investment in the financial markets involves risk, and there is always the potential of losing money when investing in securities.
• The views expressed about market trends, including opinions on bonds, equities, gold, and the crude oil market, are based on current market conditions and are subject to change without notice. These views should not be construed as a recommendation for any specific investment or financial strategy.
• Discussions of supply and demand, including historical context and future forecasts, involve estimates and assumptions that are subject to significant uncertainties. Actual future conditions (including oil supply, demand, and prices) may vary markedly from the analysis presented.
• The commentary regarding our trading approach and investment views, including short-term trading outcomes and long-term market predictions, represents the opinions of our investment team at the time of writing. They are not a promise or guarantee of future investment strategies or performance.
• Our economic outlook, including predictions of a hard-landing recession and its impact on investments such as Nasdaq 100, gold positions, and U.S. Treasuries, is speculative and should not be relied upon for making investment decisions. Economic conditions are complex and can be affected by various unforeseen factors.
• Investors cannot invest directly in an index.

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