December 2023 – Hat trick in 2023. All 3 above 20%.

Altex Momentum closes the month at +5.59% (+20.00% YTD).

Altex Quality closed the month at +3.46% (+30.47% YTD).

Altex Prudent Growth closes the month at +7.96% (+23.96% YTD).  

MSCI World closed at +3.53% in EUR (+17.64% YTD in EUR). December continued November’s rally (S&P 500 +4.41% and Nasdaq 100 +5.51%). Small caps (Russell 2000 +12.05%), Mid caps (S&P 400 +8.50%) and Mega caps (S&P Top 50 +3.06%) recovered.

This scenario responds to lower inflationary pressures (in November the US inflation figure was at 3.1%) and an employment that is still strong, but without the labour market tightness of 2022. This data increases the probability of a “soft-landing”, and inflation contention with no major shocks to the economy, although it is probable the cycle will extend beyond 2024. Markets now forecast rate cuts to begin between March and May 2024. In our view, it is premature to predict future rate cuts, as unexpected market events can still occur. Even the Fed is unwilling to disclose the start date of an eventual rate cut, until reliable and convincing inflation control data are available. Furthermore, it is likely that, even with positive inflation data, the Fed will wait a few more quarters before putting an end to the current interest rate hike cycle. History shows that the Fed usually waits for an event to put a check on economy, which calls for a more expansionary policy. This, for the time being, is not likely to happen.

Our central scenario for 2024 is that of a positive year with quarter-on-quarter volatility. If the usual seasonality of an American election year materializes, we would face a flat first quarter, with some corrections at quarter end; an upward recovery from April until the end of the summer; a further correction until the elections in November, followed by a rally until December, which would translate in year-end gains. This trend would be affected by the increase in public spending and any election promises made over the next few months.

2023 has been a good year for our equity strategies:

• Momentum stocks +20.94% (in EUR), +25.38% (in USD)
• Quality shares, +30.72 (in EUR), +33.66 (in USD)
• Prudent Growth shares, +25.17 (in EUR), +29.65 (in USD)

It has also been a good year also for hedging strategies, which have contributed: 

• Momentum: +1.8% in currency, -2.5% in index hedging and +2% in fixed income. In total, a positive contribution of +1.3%.
• Prudent Growth: +1.8% in currency and -1.9% in index hedging. In total, -0.10%.
• Altex Quality we did not use derivatives in 2023. Currency and index hedging strategies are added to the investment policy of the sub-fund in 2024.

In addition, we kick off the year with a new launch: Altex Tactical, our Vix and index strategy. We have been running this strategy in the Altex Momentum sub-fund (formerly, Sigma Real Return) since mid-2020. It gained 12% in 2021, -4% in 2022 and +24% in 2023. A spectacular track record that deserves its own vehicle for a better fit in portfolios.

Although we are reasonably positive for this year, we are still prepared to react to any changes in the market or macroeconomic environment. Through our 4 funds we can access 4 proven sources of factor returns (Momentum, Quality, Growth and Vix Carry) with hedging strategies that generate positive alpha in downturns and let profits run when the market is bullish.

Analysis helps us understand, but it is the strategies used that generate positive returns.