Markets:

Despite profit-taking in the year end sprint, 2025 closed with very positive figures. Large companies –Altex Quality’s investment universe– were the top performers, boosting the fund’s return to +10.36%. Altex Momentum, more diversified by factor and company size, followed, up +9.12%. The third place was for Altex Tactical, up +8.14%, having taken full advantage of December’s fall in volatility. Altex Growth closes the list, posting returns of +7.23%, a very good result compared to the medium-sized companies’ index.

A trompe l’oeil is an optical illusion that tricks the eye into believing that an object is actually something else. It aptly describes the bombshell with which Trump shook the world on “Liberation Day” in April: he presented tariffs as a tax paid by foreigners that benefits Americans when, the truth is that these taxes are paid by American importers and are ultimately passed on to domestic consumers. U.S. indices broke the psychological level of -20% (bear market) but then recovered almost as quickly as they had fallen.

In this V-shaped recovery crisis, our Altex DIPS system accumulated gains of +11.16% on the S&P 500 and +11.15% on the Nasdaq 100, both limiting the losses suffered by our funds and allowing us to reinvest at more attractive prices. Our returns of between 7% and 10% compare well with those of the US indices in euros: S&P 500 (EUR) +3.12%, Nasdaq 100 (EUR) +6.47%, and Dow Jones (EUR) +0.09%.

By company size, there has been significant dispersion over the year. S&P Top 50 (EUR) +5.89% vs. S&P600 (EUR) -6.05%. The latter are the 600 smallest of the 1,500 largest companies. Midcaps, MID (EUR) -6.17%.

In local currency, 12% –USD loss vs. EUR during the year– must be added. We managed to cushion some of this fall by currency hedging, which contributed from 141 to 203 basis points to equity funds.

US indices rose sharply in local currency (USD): S&P 500 +16%, Nasdaq 100 +20.17%, and Dow Jones Ind +12.97%. The rest of the world did even better: Brazil +34%, China (Hang Seng) +27%, Japan +25%, and Europe +18%. Spain stunned markets with a spectacular +49%.

Still, the S&P 500 10-year returns triple average returns posted outside the US. The American giants are at the epicenter of the technological and industrial revolution in progress, and no foreign competitor seems to pose a threat for the Magnificent in the short term, as their worldwide innovation and capital investment dominion remains unchallenged.

Our momentum bias in equity management has allowed us to be significantly overexposed to the industrial, technology, and precious metals sectors, which was a successful strategy, since the more defensive sectors suffered the most this year. Gold Miners posted +148% returns vs. +3% for Construction Materials and Utilities.

By factors, in USD, Growth Big Caps +18.33%, Value Big Caps +15.68%, Growth Small Caps +12.90%, Value Small Caps +12.40%. The defensive factors, High Dividend +6.84% and Low Vol +4.10% (negative if we subtract the 12% fall in the USD).

During 2025, monetary policy neutrality was achieved on both sides of the Atlantic. The Fed lowered rates to the 3.50-3.75% range with inflation below 3%, and Europe cut them to 2% with inflation at 2%. Bond yields accompanied rate reduction, although more so in the short term than in the long term. In general, the entire range of durations has benefited from greater price stability. In Europe, 10-year bonds have narrowed their spread with Germany, which is struggling to revive its economy against the more cyclical neighboring economies. France, whose public debt is considered riskier than Italy’s and Greece’s, has been the ugly duckling of Europe. However, US growth (despite the impact of tariffs) and monetary support from the ECB, are boosting hopes for recovery.

Outlook:

Markets continue their bullish trend, alternating overvaluation with short corrections. Cycle ends can be longer than expected, and it’s never a good idea to anticipate when they will indeed come to a close. We are exposed to in-trend sectors, with more weight in industrials than in technology, and significant weight in precious metals related companies.

2026 is a midterm elections year, and Trump is not overly confident about results. Without sufficient support, his legislature could end up empty halfway through, and he has started the year with more “Trump” l’oeil: Maduro’s arrest and the control of Venezuela’s oil, the threat to take over Greenland, increased pressure on Iran, accusations of perjury against Jerome Powell (chairman of the Fed), and imperialist messages to NATO, Russia, and China. The illusion: strengthening American security and geopolitical leadership. The reality: searching for external enemies to unite Americans around their most media-savvy president. Too many fronts and too little time. The world might sense the bluff and buy time. Political shock tactics are short-lived. Even tariffs could see a legal setback. This year, Powell’s term at the Fed ends. He has been a pillar of economic stability but has not been sufficiently appreciated. Whether the future brings a more volatile or stable market will depend on Powell’s successor. Trump favors short-term growth, to leverage American economic dominance and force more favorable trade agreements. He is not concerned about inflation or geopolitical balance; he achieves peace by force, like the ancient empires or the Italian mafia. This is a policy that will not bring stability.

With or without stability, governments continue to borrow, while central banks continue to print money. Risk assets are rising, and inflation expectations are not falling. In this scenario, it is essential to invest systematically and deploy an active risk management. We are rebalancing portfolios and correcting excesses, but remain constructive in our equity strategies, well prepared to protect with Altex DIPS and Altex USD. Here’s to 2026, which promises to be as interesting as it will be intense.