Although the funds fell due to uncertainty surrounding the war in the Middle East, equity funds are still positive for the year. In March, Altex Momentum was down -3.01%, Altex Quality was down -5.10%, and Altex Growth (mid-cap companies) was down -10.09%. Altex Tactical (volatility futures) was down -5.32%.

Altex DIPS contributed positively this month: +2.69% in S&P 500 futures and +2.05% in Nasdaq 100 futures.

The USD appreciated by +2.3% in March. We unwound the partial hedge we had in place midway through the month. -0.78% in EURUSD futures.

Market:

The war in the Middle East sent oil prices soaring above $100 over most of the month, while sparking fears of a sustained inflation increase. Central banks expressed concern about the impact of rising energy costs on consumer prices, and expectations for rate cuts this year were scaled back (from around two cuts to none). This caused bond prices, stock markets, metals, and global currencies to fall against the USD.

S&P 500 -5.09%, Nasdaq 100 -4.89%, MSCI World -5.67%. Europe fared worse this month, with the Euro Stoxx 50 down -9.26%. In Asia, China (-3.70%) held up better than Japan (-8.59%). India, another high-energy consumer, fell -10.39%.

By company size, there was little variation: all segments fell between -4% and -6% (large, small, and mid-cap companies).

By factor, there was also little variation, with all falling between roughly -4% and -7%. The two, apparently, most defensive factors plummeted: High Dividend Aristocrats -7.04% and Low Vol Equities -5.33%. The rest posted returns ranging from -3.76% (Value Small Caps) to -6.37% (Growth Small Caps).

There was greater volatility among companies, including mega-caps. Amazon and Nvidia saw slight declines, while Meta suffered an -11.6% drop for the month, dragged by doubts about the profitability of AI investments and growing legal pressure on minor accessible content. A California court fined the company, alongside Google, for promoting addiction to social media.

By sector, the greatest divergence occurred between Oil & Gas Exploration (+18.76%) and Gold Miners (-20.78%). Energy and Telecommunications posted gains of +10.27% and +2.55%, respectively. Bringing up the rear, in addition to mining companies, AI and Robotics, down -14.86%, and Metals & Mining, down -9.45%. Healthcare also had a poor performance, down -8.47%.

U.S. and European government bonds fell in price (their yields rose). The yield on the 10-year U.S. Treasury note rose to +4.43% over the month and ended at +4.31%. Similarly, the 10-year German bond yield rose to +3.08%, ending the month at +2.98%. Two-year bonds also suffered, affecting low-risk portfolios. Only money market funds weathered the month without volatility.

The USD appreciated against other currencies, though it failed to decisively break through the past few quarters’ resistance levels.

Outlook & Positioning:

On March 31, markets began to rebound, driven by expectations of a quicker resolution to the war and the reopening of the Strait of Hormuz. On the first weekend of April, Trump escalated tensions by issuing an ultimatum to Iran, threatening to attack power plants and bridges if oil tankers were not allowed to pass through the Strait, starting Tuesday, April 7. On the 8th, following the announcement of a two-week ceasefire and the start of negotiations between the U.S., Israel, and Iran, markets rallied. Trump is already sending triumphant messages, and the ceasefire could be extended: Iran –already severely weakened– would face growing internal tensions if the attacks continue, while Trump needs to face this year’s midterm elections in a climate of reduced tension. It is probable that tensions in the Middle East will gradually ease, although the conflict is still far from being definitively solved: an internal regime change, driven by the Iranian people –divided between supporters of the current regime and those who reject it (violently repressed and lacking the resources to confront extremist leaders)– is necessary. A ground invasion by the U.S. is unlikely, and it will not be easy to determine if agreements in a potential peace process are being upheld.

Albeit war, U.S. employment data continues to show positive trends, and the economy keeps growing. Rising defense spending and easing fiscal discipline suggest that fiat currencies will continue to lose value relative to income-generating and/or value-preserving assets.

Despite market corrections, we maintained our equity positions, accompanied by active hedging management. April has started on a strong footing, and we have capitalized on the initial rebound. Since short-term inflationary risks are linked to oil prices and could therefore disappear quickly in the event of a ceasefire or peace, we have not taken any additional risk-reduction measures. We remain unhedged in USD, although hedging is likely to be activated if the currency continues to weaken. The sectors that were performing best prior to the conflict are likely to regain momentum once hostilities cease. We remain overweight in the industrial, technology, and materials sectors.