Following the desperate situation in March, by the last quarter of 2020 we found ourselves almost in a state of exuberance. The year will be remembered for the markets’ quick and spectacular turnaround. Once it was confirmed that the COVID-19 pandemic was spreading with virulence in Europe and America, the financial markets were left ravaged at the beginning of the year and many managers lost their bearings. The rout continued until it became clear that governments and central banks could organize a rescue that would at least be temporary, and that science, with stunning efficiency, could provide the glimmer of hope we so desperately needed.
Given that each of our three main strategies generated positive returns, we are well placed to end the year in positive territory, just as we had hoped at the end of the second quarter.
Although this last quarter was quieter than the previous two, the factors provoking considerable volatility in the financial markets – COVID-19, a highly uncertain economy, and the U.S. elections – are still very much with us. We therefore believe that our investors’ best interests over the next few quarters will be well served by the Amethyst Fund’s approach, which is based on achieving an absolute return with less volatility.
In comments made on March 23, Jerome Powell, Chair of the U.S. Federal Reserve (the Fed) suggested that the financial markets would recover in the second quarter. He confirmed that a liquidity shortage was rapidly developing in all sectors of the economy, and he offered his assurance that the Fed would do whatever was necessary, and use every resource imaginable, to fill these gaps as required. That was all it took: a substantial rebound in the second quarter erased much of the historic rout in equity markets during the first quarter.
Even in an environment where equity markets were already shaken during the last 10 days of February, the Fund nonetheless posted an altogether very acceptable result, down barely 0.5% for the first two months of the year. But March would prove to be much more difficult.
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