Commodities are outperforming YTD and on the flip-side of the Q1 leaderboard were growth stocks. In the middle we find emerging markets, who pulled ahead early in the quarter driven by a weak US dollar and growing interest among investors to diversify globally.

Month-end featured a breathtaking relief rally that started to lose momentum into the long holiday weekend, but US equity indices finished the shortened week positive for the first time since February.

Headline driven market reversals are taking their toll on investor sentiment and tactical trading strategy PNLs.

The varied performance across sub-strategies, styles, regions and sectors during this stress period highlights the real-time benefits of hedge fund portfolio diversification. Many hedge fund areas, especially Global Macro, are underperforming MTD amid recent crisis-driven market turmoil.

Deutsche Bank analysts put together some interesting analysis this week on war’s impact on the S&P 500. Good news, according to their analysis of 30 past war events, the S&P 500 bottoms T+15 days post war onset at just around the -4% level where we stand today.

While historical statistics can be comforting, every situation is different and clearly there are many open-ended issues at play here before the all clear flag is waived. In the meantime, hedge fund PMs are opting on de-risking as the best path forward as many typical risk-off hedges (bonds, precious metals, equity puts) are proving elusive.

The fog of war pervades global asset prices and investor sentiment. Bond prices are falling alongside stocks, currently offering no diversification or defensive flight-to-quality benefits.

The spike in oil prices is creating inflationary headwinds that are driving down the price of global bonds. With a flight to quality move not unfolding, balanced stock and bond portfolios are suffering in tandem.

Controlled chaos has ensued in recent days as investors slowly readjust their expectations regarding the timing for when Middle East military activity might de-escalate.

Thus far investors have been quite resilient in the face of an uptick in military activity in the Middle East and an ensuing rise in oil.

Selling is underway on Friday as investors are beginning to understand the military operations in the region could take time to quiet down alongside an unsteady upswing in the price of oil.

80% of the top 70 equity markets globally are up at least 20% off their 52-week low (with +20% being a common benchmark/trigger for “bull market“). The last twelve months have featured growing broadening in global equity markets versus previous years when leadership was concentrated in the US.

January FOMC minutes released earlier this week signaled mixed viewpoints within the Fed as some members advocate for further rate cuts while others seek to stay on hold or even raise rates if inflation data heats up.

The mixed viewpoints within the Fed are emblematic of the current market environment where investors can interpret developments from positive or negative perspectives.

We are observing risk-taking gridlock across markets driven by technical and fundamental rotations that are triggering de-grossing, which amplifies the daily price movements.

The benefits of integrating analysis from hedge fund annual audited financial statements into hedge fund due diligence.