Monthly report of our funds as of August 31, 2024

August Highlights:

• Strong Performance in a Volatile Environment: The funds, particularly Altex Prudent Growth (+3.49%) and Altex Momentum (+2.55%), achieved positive returns due to well-executed strategies in both equities and hedging.

• Recovery in Equities: Despite a negative start driven by the crisis in Japan and recession fears, major U.S. indices ended August in positive territory, with the S&P 500 and Nasdaq 100 up by +2.28% and +1.1% in USD, respectively.

• Impact of Monetary Policy: The Jackson Hole meeting was pivotal, with Jerome Powell announcing the start of policy tightening, benefiting fixed income in particular, and causing a decline in the U.S. dollar.

• Outlook for September: Volatility is expected due to the U.S. election calendar, but with a bullish outlook towards year-end, particularly in industrial companies and growth stocks versus value stocks.

Fund Performance:

The best results came from Altex Prudent Growth and Altex Momentum, with returns of +3.49% and +2.55%, respectively. In Prudent, four tech companies stood out with returns exceeding 20%, driven by better-than-expected results. In Momentum, the high-margin block gained 6.33% in euros, while the U.S. 10-year Treasury bond rose by more than 1% (currency-hedged).

The Trend Following strategy delivered returns of 1%, 1.53%, and 1.82% for Momentum, Prudent, and Quality, respectively. Altex Quality, focused on large companies, added 0.79%, consolidating its strong performance for the year. Altex Tactical recorded a slight decline of -0.24%, but maintains a 2024 YTD return of 3.79%, despite the volatility spikes in the first week of August.

Equities:

The month began with the Japanese stock market crisis and renewed recession fears in developed economies. Japan unexpectedly raised interest rates, leading to a 6% appreciation of the yen in only four days, while the Tokyo stock market plunged by 20% during the same period. In the U.S., the S&P 500 fell by -6% in three days, and the Nasdaq 100 dropped by -7.6% in daily closes, with even larger intraday declines.

From August 5, markets started to recover, culminating just before the central bank meeting in Jackson Hole on August 22. Despite the negative start, the strong recovery allowed indices to reach month-end in positive territory in USD: S&P 500 (+2.28%) and Nasdaq 100 (+1.1%). However, when converted to euros, these returns decrease by approximately 2%.

Macroeconomic Environment, Fixed Income, and Currencies:

The most significant event of the month was the Jackson Hole meeting, where Jerome Powell delivered the most important message on monetary policy this year: “It is time to start policy tightening. […] The pace of rate cuts will depend on data…”. This change is significant for markets’ evolution, marking the beginning of rate cuts without recession or crisis, reflecting confidence in controlling inflation and concern for growth and the labour market.

Fixed income was the main beneficiary of this shift, contributing 50 basis points to Momentum. As for the U.S. dollar, it suffered due to the prospect of lower returns, although it stayed within the lateral range it has been in since 2023. The euro did not strengthen significantly as the ECB has also indicated its intention to cut rates, which should stabilize spreads.

The yen was the currency that benefited the most from central banks’ actions, and the Japanese stock market showed its dependence on the currency’s evolution. Although a narrowing of the Yen-USD spread could be positive for the Japanese currency, it would be negative for the Nikkei.

Outlook:

September began with declines, as expected, since this month usually brings volatility. Additionally, we are on the brink of U.S. elections, which adds more uncertainty. The messages from candidates, Trump and Kamala Harris, will become increasingly aggressive and move the markets. Oil is already feeling the pressure of Trump’s announced intention of lowering prices, and markets could pull back if Harris’s proposal for aggressive tax hikes gains traction.

We anticipate volatile September and October, though not necessarily with deep declines, and a bullish year-end, in line with the usual behaviour of election years. We find more short-term potential in some industrial companies than in the tech sector, where a too-optimistic future has already been priced in. We expect better performance from growth stocks vs. value stocks, in a low and declining rate environment and believe that medium and small companies’ recovery will be stronger in the coming months.

In our funds, we continue to strengthen selection strategies to take advantage of the opportunities offered by different assets and sectors. In Momentum, the balance and greater diversification by factor and asset type are working well. In Quality, we are rotating towards smaller-cap companies, but always within the 300 largest in our universe. In Prudent Growth, we are focusing on the companies with the best prospects in an environment of rate normalization. During the drawdowns, the 10-year bond, and especially the Trend Following strategy, which allows for early short positions in market corrections, have provided significant support.