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September was a month of wide-ranging returns across large and small companies, technology and industrial firms, and the energy and metals sectors.
Altex Quality performed well thanks to its bias to large companies, up +0.39%, while Altex Momentum and Altex Growth, given their low exposure to megacaps, fell in line with the indices and were down -4.57% and -4.46%, respectively. Thanks to the gentle rise in index volatility (+1.14%), Altex Tactical was the top performing fund, in a tough month for many companies.
This month’s Altex DIPS hedging results were mixed: -0.05% for Momentum, +0.25% for Quality, and +0.74% for Growth. Some alpha was generated in the hedges thanks to the Nasdaq index.
The USD appreciated +2.53% against the EUR.
Markets:
There was significant internal turbulence in markets in September: rising bond yields (with prices plunging), higher oil prices (escalation of the war in Iran), rebound in the Tech, Semiconductors, and AI sectors, while Industrials, Consumer Discretionary, Real Estate, and Homebuilders (dragged by more expensive financing) fell, the U.S. dollar strengthened, and Metals and Mining stocks dropped (due to a more restrictive Fed, that increased rates to 4% on September 16).
S&P 500 -0.45%, Nasdaq 100 +3.23%, Dow Jones Industrial -4.29%, and MSCI World -1.24%.
Small-cap companies underperformed large-caps: MAGS +4.29%, S&P Top 50 +1.79% vs. S&P 600 -5.56% and Russell 2000 -5.40%.
By sector, performance was widely mixed, ranging from Semiconductors (+9.41%) and Technology (+4.96%) on one end, to Metals & Mining and Homebuilders on the other (-12.33% and -7.57%, respectively).
By factor, Big Cap Growth led the month, up +2.08%. On the downside, Big Cap Value, Small Caps (both Value and Growth), and defensive factors, Low Vol and High Dividend, fell from -3.5% to -6.5%.
Outside the U.S., Brazil and Japan posted positive returns (up +3.39% and +1.65%, respectively). China, Europe, and India were hit by rising risk premiums and higher energy costs and posted losses ranging from -3.8% to -6.1%.
In commodities, Oil rose +9.5%, while Gold and Silver fell -6.6% and -9.3%, respectively. Bitcoin held up well this month, showing a stronger correlation with Technology than with the assets that usually protect against currency devaluation, such as Gold.
Outlook and positioning:
September is traditionally a difficult month for markets, and this year has been no exception, even though indices have managed to stay afloat thanks to the momentum of megacaps, which have offset most of the market’s losses. At this point, there is extreme tension in the bond market, and we are facing the prospect of high inflation.
Our funds have underperformed due to our lower exposure to megacaps and our overweight position in industrials and metals. However, this is merely a temporary pullback, caused by the debt market crisis, which should see some relief as uncertainty surrounding the midterm elections lessens.
Following the earnings season, we have repositioned our portfolios to a slightly more balanced allocation across the sectors that make up the funds.
In Altex Momentum, the sectors with the highest weightings are Information Technology, Materials, and Industrials.
In Altex Quality, the sectors with the highest weightings are Information Technology, Industrials, and Healthcare.
In Altex Growth, the sectors with the highest weightings are Materials, Healthcare, and Industrials.
Overall, we maintain a pro-inflationary and risk-on bias, underweight in the “Magnificent Seven,” and well-positioned for a likely easing of tensions in the aftermath of midterm elections.
