Markets:

Our funds posted gains between +3.12% and +0.08% in euros. Altex Growth and Altex Tactical led the performance, thanks to the strong results of the Growth factor in the former and the stability in S&P 500 volatility in the latter. Altex Momentum and Altex Quality successfully preserved year-to-date gains in a month marked by greater dispersion in stock returns, driven by the behavior of the Momentum factor and the typical volatility of earnings season.

July was generally a month of some mean reversion, with the “Magnificent 7” outperforming the rest of the S&P 500 index (MAGS +5.62% vs RSP +1.04%).

The US dollar (USD) appreciated by +3.19% against the euro, which failed to break the 1.18 resistance level. During the month, we reduced currency hedging to 50%.

On the macroeconomic front, we observed a slight easing of trade tensions, with framework agreements between the US and Japan, as well as with Europe. Negotiations with China and Mexico have been postponed. In Europe’s case, a general tariff of 15% was established—presented by Europe as a ceiling due to exemptions for strategic goods, although some raw materials exceed this threshold. The new framework improves the treatment of vehicles, previously subject to a 25% tariff, which benefits Germany in particular.

As we’ve mentioned previously, tariffs have both inflationary and restrictive effects on the economy. They represent a widespread tax increase on US importers, who will seek to distribute the cost between foreign producers and domestic consumers, depending on each product’s demand elasticity.

Trade noise and the mixed inflation data from June (released in July) led the Federal Reserve (FED) to hold interest rates steady at 4.5%, against Trump’s wishes. He even threatened to fire Powell (a power he does not possess), before settling for verbal disagreement once again.

At the end of the month, employment data were revised downward, reflecting fewer new jobs than previously reported in past months. This triggered a market correction in the final week, affecting small-cap companies more sharply.

The month begins with higher volatility, driven by rising tensions between the US and Russia after a vague ultimatum from Trump aiming to force an end to the war in Ukraine within 10 days. Such a swift resolution would be surprising, given how entrenched the conflict has become with little room for short-term compromise.

Despite the noise, indices moved higher: S&P 500 +2.17%, Nasdaq 100 +2.38%, and Dow Jones Industrial +0.08%. International markets showed wider dispersion, from Hang Seng (China) +2.91% to India –5.46%, with the Euro Stoxx 50 relatively flat at +0.31%.

By factor, Growth in large-cap companies stood out (+3.73%), driven by the “Magnificent 7”, while Low Volatility Equities slipped slightly (–0.26%). The rest ranged between +0.6% (large-cap Value) and +1.7% (small-cap Value).

By sector, Healthcare was the worst performer, targeted by Trump in his push to reduce government healthcare costs. On the upside: metals and mining +9%, artificial intelligence +5.6%, utilities +4.9%, and technology +3.8% led the month’s gains. Industrials also performed well, closing at +3%.

In fixed income, bond yields rose during the month, though the move was corrected in a single day following the employment data release and market pricing of nearer-term rate cuts. The US 10-year yield rose from 4.23% to 4.38%, then fell back to 4.22% on August 1. The 2-year yield went from 3.79% to 3.96%, before dropping to 3.68% on August 1.

Outlook and positioning:

The market needs to consolidate gains after earnings season and the easing of trade tensions. August is typically a month prone to corrections and rebounds amid lower market liquidity.

Our hedging strategies remain highly active, adjusting positions even in sideways markets, to initiate short exposure early in the event of a more significant correction. 

Our funds continue to perform well this year, with no high concentration in the Magnificent 7 and limited USD exposure. We continue to outperform US indices in euro terms, thanks to strong contributions from the Altex DIPS and Altex USD strategies. 

The outlook remains positive for the second half of the year, although we may see increased volatility in the third quarter. During this period, we will stagger new capital allocations and aim to take advantage of market corrections as they arise.