North Asset Management’s MaxQ Macro Fund suffered a loss of -0.81% in April, bringing the fund’s year-to-date return to -2.07%. MaxQ is currently positioned on the long side of the USD, while maintaining selective shorts in emerging markets and commodity currencies.

Take a look at North Asset Management’s emerging markets’ fund returns below.

North MaxQ Macro Performance

MaxQ Macro expects further rate cuts from ECB

In its monthly commentary, the fund managers expressed a cautious outlook on the Eurozone. MaxQ said that there are a few positive signs in the region, but there is still a long way to go before employment shows substantial recovery. Moreover, divergence between Germany and the rest of Europe has become more evident over the last few months. Inflation numbers came in below ECB’s forecast and consensus estimates, which led MaxQ to speculate that the central bank would take a more dovish stance in June. The fund expects the ECB to cut rates by 10 bps in June. A large-scale asset purchase program from the ECB remains unlikely, as it faces strong opposition from Bundesbank and other central banks in Europe, said MaxQ.

North MaxQ Macro  Eurozone Composite

North MaxQ Macro Fund has a long position in Spanish government bonds against French bonds. The fund added to its short position in the euro against the USD in anticipation of stronger Q2 numbers from the U.S. and dovish ECB policy action.

North MaxQ Macro bond yields

Inflation to rise in the U.S

MaxQ is more optimistic regarding the U.S. economy, and expects the unemployment rate to fall to 6% in the later half of the year. Based on its view that inflation will rise in U.S., MaxQ established a long breakeven inflation position in the 5 and 10 year rate curve. The fund believes that inflation that was artificially lowered in the last couple of months due to weather conditions will rise up on back of growth in domestic demand and a tightening labor market. Following this line of thought, MaxQ increased its long USD position against shorts in other currencies.

North MaxQ Macro US NFIB

In Japan, MaxQ finds the opportunities in equities more promising than shorting the yen. The managers are convinced that the yen will depreciate in the medium term, but for now its movements will be range bound. That means investment in underperforming equities, whose fall is attributable to foreign selling, is more attractive. says MaxQ. The letter noted,

“Our view is that the fundamental picture supporting Japanese equities is very much still intact, while at the same time the equity demand flow story is now supportive. From a fundamental perspective, both lagging and leading indicators are near all-time highs.”

MaxQ said that the improved corporate outlook in Japan has not yet translated into capital expenditures, which may encourage companies to launch stock buyback programs.

North MaxQ Macro Investments in Japan