The Omni Macro Fund posted a gain of 2.2 percent in August, bringing the YTD gain to -2.31 percent. Omni Macro has been down in five of the eight months that ended on August 30.

Housing Stocks

GBP likely to show more strength

The monthly investor letter obtained by ValueWalk comments on the consistent gains in pound sterling, despite of Bank of England’s best efforts. The PMI and unemployment data in the UK has continued to show strength, which has translated to UK rates and GBP. The fund has maintained shorts in EUR against GBP and also has short positions in June 2015 short sterling contracts. Omni’s tactical portfolio has negative bets in the U.S. and European equities, 10-year U.S. treasuries, and has held longs in USD against gold, CAD and MXN. The fund profited on all these holdings in the last month.

Will U.S. housing recovery be over soon?

The fund points out the dull numbers in new home sales and housing starts that were reported in the last month, saying that higher yields in the U.S. is taking a toll on the housing recovery. Higher rates have negatively affected the demand for new mortgage, and in the past couple of years the bulk of the growth in the housing sector has been driven by institutional and professional investing rather than private owners. The fund is watching the weakening dynamics in the U.S. housing recovery closely, but has not invested on this theme yet.

Emerging markets looking at more outflows

 Omni Macro does not have a major focus in emerging markets, however, the fund is considering the possibility of expanding its tactical long portfolio as EM currencies and equities reprice themselves. The risks to stepping into EMs at this point is primarily the likelihood of further sell-offs. Omni Macro points out that the concentration of tourist investors in the EM space almost guarantees that their rush to exit would continue for some time, and merely a three month sell-off would not suffice to balance out the nearly seven years of gains that the EMs have enjoyed. The fund managers point out that the current account deficit that several of the major emerging economies are going through can only be stopped with significant rate hikes, which have its own pitfalls—like hurting local bond markets. India has taken steps like regulating gold imports and increasing interest rates, however, it would take time for these measures to show a result. In Omni Macro’s analysis, Brazil is the best positioned in this regard.