Agio Gold Sector Fund Market Update: December 2023

Stock Markets and The Federal Reserve's Stance

Today, the Federal Reserve signaled a significant shift in its monetary policy, announcing no further rate hikes for the remainder of the year and a strong likelihood of rate reductions in the coming year. This pivot suggests a softening economic outlook. Market participants are interpreting this as the Fed setting a 'put' – essentially a safety net – under the market. While conventional wisdom suggests that lower interest rates stimulate the economy, historical evidence often tells a different story. Despite this, the narrative persists, buoyed by Wall Street's optimism. In light of this, we anticipate a 'choppy' market trajectory with a modest upward trend, aligning with our previous month's analysis.


Macro-Economic Landscape

The Fed's announcement sparked notable activity in the fixed income sector, particularly within the U.S. Treasury Curve. We observed substantial drops in two-, ten-, and thirty-year rates, with shifts as dramatic as 30 basis points – a remarkable intraday movement. This response, especially in longer-term maturities, reflects market sentiment rather than Federal Reserve guidance. Key financial institutions are bracing for a downturn in economic activity in the near term. The persistent inversion of the yield curve paints a concerning picture for global economic health.


Market Performance Overview

In response to the Fed's policy shift, several major risk assets have surged to new heights:

YTD 2023

S&P 500                                                                                           +25%

NASDAQ 100                                                                                +51%

Dow                                                                                                     +12%

Bitcoin                                                                                            +160%

Commodities (CRB Index)                                                         -6%

Gold                                                                                                      +12%


Gold Sector and Tactical Trades

Gold has notably broken out to new all-time highs as of late November. The Agio Gold Sector Fund has capitalized on this trend, with our initial stock positions yielding a 16% cumulative return over the past two months. Our timing model, which integrates monetary and technical risk-adjusted metrics, has proven effective.

The recent surge in gold prices suggests a highly favorable outlook for the metal in both the intermediate and long-term. We anticipate significant price movements over the coming months, in line with historical trends in similar market conditions.

In accordance with our strategy outlined last month, the Agio Gold Sector Fund will continue to build its core position in the coming weeks, capitalizing on the current market dynamics.


⚠ Disclaimer: