Market Overview: Navigating Crosscurrents
March presented a difficult backdrop for risk assets, shaped by geopolitical noise, policy shifts, and structural uncertainty. The VIX - Wall Street’s fear gauge - briefly surged above 28 before retreating to the low 20s, reflecting elevated anxiety without full-blown panic.
US equities extended their underperformance relative to global peers, echoing a fading belief in “US exceptionalism” as investor confidence was rattled by the new administration’s uncertain policy direction. The US Dollar weakened accordingly, undermining its traditional safe-haven role and adding to the complexity of cross-asset correlations.
In Europe, Germany broke with decades of fiscal restraint by announcing a record stimulus plan. This catalyzed the largest single-day spike in Bund yields since 1990, underscoring a historic policy pivot. Meanwhile, renewed trade tensions out of Washington exacerbated market fragility, with tariff threats triggering sharp reversals and the breakdown of long-standing asset relationships—such as simultaneous declines in the S&P 500 and the US Dollar. Traditional diversification failed to protect, highlighting the need for a more adaptive investment playbook.
Fund Development: Navigating the Noise
Despite turbulent conditions, the DOM Global Macro strategy closed the month with positive performance—demonstrating the value of a diversified, rule-based approach paired with discretionary oversight.
• Systematic strategies were mixed: trend-following and equity allocations detracted, while foreign exchange and commodities added meaningful gains.
• Discretionary defense played a vital role: equity and credit protection helped cushion volatility, especially in US and European exposures.
• Opportunistic trades added alpha: a long EURCHF position benefited from resurgent optimism in European assets, though some gains were offset by losses in emerging markets, notably from a long Korean Won position.
Fund Positioning: Defensive, Not Passive
We continue to lean defensive, mindful of heightened uncertainty and shifting macro dynamics. Allocations to volatility risk premia and EM FX carry have been dialed back. In contrast, we retain meaningful protection through:
• Equity downside hedges in the US and Europe
• Credit protection to guard against widening spreads
This posture reflects a deliberate emphasis on resilience over return-chasing in an environment where the rules of engagement are changing.
Outlook: Regime Shift in Motion
Markets are confronting the possibility of a deeper, more structural shift in the US economic and political regime. Caution is the prevailing sentiment, with “buy the dip” losing its grip as the default mindset. The open question remains: will deteriorating soft data translate into tangible economic weakness?
At DOM, we favor preparation over prediction. In the face of political fragmentation, rising inflation expectations, and weakening macro signals, a reactive stance leaves portfolios exposed. Instead, we maintain a forward-leaning but cautious posture—ready to pivot as dislocations arise.
This type of environment often births opportunity. With its multi-strategy, adaptive design, DOM is purpose-built to navigate the unknown—balancing discipline with flexibility and embedding protection as a feature, not a fallback.
