CTAs shift focus to relative worth trades: UBS

Commodity Buying and selling Advisors (CTAs) are sustaining a risk-on positioning whereas utilizing Gold and the US Greenback as risk-off hedges, in accordance with UBS.

Regardless of equities transferring sideways in November, except for US and Canadian indices, CTAs haven’t considerably decreased their lengthy positioning. That is attributed to decrease realized volatilities, which have helped restrict outflows.

Presently, CTAs’ general fairness beta is consistent with its long-term common, and their fairness threat is now predominantly centered on relative worth trades, favoring lengthy positions in US equities versus quick positions in European and Latin American shares.

In foreign money markets, after a current bout of US Greenback shopping for, estimated at round $50 to $60 billion, CTAs are believed to have restricted room to extend their positions, notably in G10 currencies.

Revenue-taking is anticipated in currencies such because the Indian Rupee (INR), Peruvian Sol (PEN), Israeli Shekel (ILS), Canadian Greenback (CAD), and Norwegian Krone (NOK). Nevertheless, the predominant expectation is for a stronger US Greenback.

The main focus of CTAs has shifted throughout the commodities sector, with important gross sales in metals over the previous few weeks. Going ahead, they’re more likely to flip their consideration to buying vitality and agricultural merchandise.

The present market indicators point out a bullish stance on shares, credit score, and the US Greenback, whereas a bearish view is held on bonds. Particularly, CTAs are bullish on most fairness markets, notably within the US, whereas holding bearish positions on Latin American indices, Kospi2, and CAC.

Within the foreign money markets, there may be bullish sentiment on the US Greenback and EMEA currencies, neutrality on the British Pound, and bearishness on commodity and Latin American currencies. For commodities, there’s a bullish outlook on treasured metals, a impartial stance on industrial metals, and a bearish perspective on vitality and agricultural merchandise.

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