Monthly report of our funds as at 31 March 2024 

March was another good month for our funds. We accumulated +10.04%, +10.69% and +9.96% YTD returns in our equity funds, and +2.51% in our Tactical volatility fund (vs S&P 500 +10.16%, Nasdaq 100 +8.49% and Eurostoxx 50 +12.42%). It has been an excellent first quarter in terms of profitability and performance for our strategies, and we have captured the entire market upside in a year that began with considerable scepticism in the investment community.  

Macro: 

Contrary to many forecasts, the economy is still strong, especially in the US, although inflation has picked up slightly. PMIs and employment data are healthy and, the general feeling is that a slowdown is remote. The strong demand in employment contrasts with the US Federal Reserve’s dovish stance. In fact, there are two encouraging elements that prompt us to believe that inflation control is on track: The housing component is a lagging indicator vs. real market prices, and will fall in coming months and, on the other hand, the number of workers entering or returning to the labour market has increased, so wage pressure also seems to be contained. These two elements underpin the expectations for lower rates. Still, rising oil and other commodities’ prices and economic growth add pressure, which could stall lower inflation, delaying central banks’ rate cut plans and baffling market expectations.

Market: 

Stock market indices have performed well. In March, the S&P500 rises +3.10%, driven by sectors such as Oil & Gas Exploration, Energy, Home Builders, Utilities and Materials. The Telecom, Healthcare, Consumer Discretionary and Technology sectors lagged (despite the good performance of chip and semiconductor companies). Nasdaq 100 ended March up +1.17%, weighed down by Tesla, Apple and Meta, although Nvidia and Alphabet helped performance. 

By company size, medium and small companies have risen more (MID +5.39%, RUT – Russell 2000 +3.39% vs S&P Top 50 +2.06%). By factors, Growth gained more in mid-caps, while Value profited in large caps. However, in general, all factors closed a very good month with the only exception of High Growth. 

In fixed income, US government bond yields remained stable (3M +5.37%, 2Y +4.63, 10Y +4.21%, 30Y +4.35%). European fixed income behaved similarly, with minor variations among countries. European rates stayed at 4.5% (deposits at +4%) and 3M bonds ranged from 3.63% in Germany to 3.72% in Italy. In the long tranches –10 years– the dispersion continued: Germany +2.39%, France +2.92%, Spain +3.24% and Italy +3.79%. 

The EURUSD ended March down -0.18% despite having appreciated by more than one digit over the month. 

Central scenario and positioning: 

Markets are bullish in this election year in the US; economic data is strong in the US, recovering in Europe, and climbing out of the pit in China; sufficient elements pointing to a gradually easing of inflation –with no additional rate hikes, although the risk of a rebound if rates are lowered is still high, and central banks will probably have to mull over possible rate cuts. We expect a moderate correction sometime between April and June, probably on the back of peaking inflation, or during the earnings release season if major companies express concerns about the future. 

We have been accumulating liquidity in our equity funds (Momentum, Quality and Prudent Growth) to take advantage of corrections, while USD hedging strategies have not put in place. The trend following index hedging strategy had little activity during March. The beginning of 2024 was above average for bull market years, and volatility remained low. In our volatility fund, Tactical, we maintain a medium-low risk profile in anticipation of a less favourable environment in April. Even so, the risk thermometer ended the month in the risk off zone. In the Momentum fund, we are long in 10-year government bonds as a protection against lower growth expectations once the corporate earnings season begins.