The funds that saw the sharpest falls in March are rebounding. In April, Altex Momentum was down -0.20%, Altex Quality was up 10.12%, Altex Growth (mid-cap companies) was up 6.32%, and Altex Tactical (volatility futures) was up 6.40%.

The Altex DIPS hedge made negative contributions during the month, from -1.13% to -1.28%, depending on the fund.

The USD dropped -1.5% in April, moving within a narrow sideways range and showing signs of breaking through the 1.18 level. The hedging strategy was activated, and later deactivated as the USD appreciated again, yielding returns of between -0.29% and -0.42% for the month.

Markets:

Tensions in the Middle East eased, and although the situation has not been definitively resolved, markets have priced in expectations of an eventual resolution and rebounded sharply since the beginning of April.

S&P 500 +10.42%, Nasdaq 100 +15.64%, MSCI World +9.18%. This month, Europe once more lagged (Euro Stoxx 50 +5.60%). In Asia, China (+2.48%) saw the smallest rebound. India and Japan were up around +5.5%.

By company size, small-cap companies regained the lead, with the Russell 2000 up +12.16%, closely followed by the largest companies in the S&P Top 50, up +11.64%. Mid-cap and S&P Equal Weight loitered, at +7.8% and +6%, respectively.

By factor, there was significant dispersion this month. The two most defensive ones were left far behind: High Dividend Aristocrats +2.25% and Low Vol Equities +2.03%. Leading the rise were Growth Small Caps +14.68%, Momentum +12.19%, and Growth Big Caps +11.89%.

Performance among blue-chip stocks was mixed, as well, in the thick of earnings season: Google was up +33%, driven by positive expectations on the integration of its AI engine and its search engine, and by the significant advances made in autonomous vehicles. Amazon met expectations and climbed up +27% in April, and Nvidia finished strong (up +14.4%) although it lost some momentum at month-end. The rest ranged between +10% and +2%.

By sector, the principal pre-war market drivers are regaining momentum: Semiconductors was up +32%, AI and Robotics rose +26%, and Telecom increased +20%. Bringing up the rear, Gold Miners fell -3.79%, Energy, Oil & Gas Exploration, and Healthcare, were down between -0.4% and -2%.

U.S. and European government bonds remained relatively stable, with a slight rise in yields at month end in anticipation of Powell’s final speech as head of the Fed.

Outlook & Positioning:

Three factors have driven markets: easing of tensions in the Iran conflict, a change in the Fed chair (as the successor is expected to be somewhat more accommodative than Powell), and announcements of sharply rising profits that beat earnings forecasts.

The market is trending upward, driven by trillionaire investments in both the private sector (AI, data centers, etc.) and the public sector (defense, infrastructure, subsidies for semiconductor manufacturing, aerospace) over the coming years. These two drivers have pushed markets to fairly high valuations in very cyclical sectors, that will decline when expectations are not met.

At the micro level, we are monitoring the rising risks in indices and companies. The current bull market is underpinned by a few large-cap companies that have been generating high profits with relatively light balance sheets. These same companies have significantly increased their CAPEX (capital expenditure) and are becoming more cyclical. This is a shift in markets’ essential characteristics that must be managed efficiently. A large part of the 2001 crisis was caused by large investments in fixed assets made by telecommunications companies in their attempt to dominate mobile and data infrastructures. Nowadays, the race is for AI dominion, although today’s mega corporations have greater profit-generating capacity, are less leveraged, and have a firmer control over the value chain. However, even if the situation is better, risks are not unimportant.

Throughout the crisis and subsequent recovery, we have maintained our exposure to sectors with strong structural trends (semiconductors, industrials, gold mining, and technology). In healthcare, defense, and energy, we now hold positions in specific segments, and overall, these sectors have lost some weight in the portfolios.

So far this year, hedges have had a dampening effect during the crisis but have not generated a significant net contribution. The funds’ strong performance this year is due to successful stock and sector selection.