Monthly report of our funds as of May 31, 2024

The US stock market and bonds recovered in May, supported by the decline in the USD. Very positive market reaction after the falls in April, strengthening the upward trend and good outlook for the rest of the year. The MSCI World rises +2.66% in Euros. The Euro was up +1.71% vs USD, benefiting the US indices quoted in local currency (S&P 500 +4.80%, Nasdaq 100 +6.28% vs a more modest +1.37% for the Euro Stoxx 50).

Our funds had a positive month, especially Altex Tactical (+3.97%), on the back of lower volatility and its exposure to US indices. Altex Prudent Growth, however, was an exception as it was weighed down by the weaker performance of technology and healthcare high-growth companies, which delivered good results but were more conservative in their forecasts for the coming quarters. Altex Momentum and Altex Quality closed the month in positive territory: +0.79% and +0.49%, respectively. Their equity strategies performed well although they somewhat lagged the market due to the fall in USD and their underweight stance in mega caps.

In the US market, April’s concerns about inflation eased in May thanks to slightly better than expected data. The month started with weak manufacturing PMIs (ISM Manufacturing 49.2 vs 50 expected), and employment data (non-farm payrolls 175k vs 238k expected). The Federal Reserve kept rates unchanged (5.25 – 5.50) and delayed future cuts until inflation control improves significantly. However, the Fed felt it was unlikely further rate hikes would be necessary and this encouraged markets. We are now in a scenario of prolonged higher rates, while keeping an eye on rate cuts down the line. Employment remained stable, with lower inflationary pressure on wages. US annual inflation remained at 3.4%, with no upward surprises this time, and markets continued to rise until almost month end. In the last 10 days, the regional banking, technology, health care and construction sectors were the ones that declined the most.

The discordant note (and a warning sign to keep in mind) was the dispersion of companies and sectors. Despite the good tone of the indices, gains were concentrated in sectors such as Semiconductors (+12.33%, driven by Nvidia: +26.89%), Telecom +12.27% and Utilities +8.96%. Energy -0.34%, Consumer Discretionary +0.20%, Oil & Gas +0.38%, and Industrials +1.64%. The proportion of stocks that participated in the May rally, decreased after the 21^st, and only half of the US market (NYSE) remained above its 50-session average.

In Europe growth is still well below target in large countries such as Germany and France, and the ECB was telegraphing signals of rate cuts for 6 June. Since a lower interest rate in Europe vs USA does not benefit the Euro, we are long USD. At the time of writing this commentary the results of the European elections are known and have forced the dissolution of the French National Assembly by Emmanuel Macron, who has not resigned as president for now, but would be in a weak position if he loses the next elections. The negative impact on the Euro and European stock markets reflects the lack of confidence in the manner in which Europe is currently governed, as leadership depends more on the visibility and initiatives of Member State Presidents than on the European institutions themselves. This is a weak system, and is perceived as such by global leaders, accelerating Europe’s loss of relevance in an increasingly competitive international market.

We expect to continue to see a sideways market in the coming months, such as we have seen since March, with rapid but contained rises and falls. The valuations of some large cap companies are already advising caution, although their results continue to back positive momentum. Smaller companies are still well below all-time highs. Markets remain bullish, and it is important to stay invested in an economy marked by growth and inflation. Our trend and market thermometer systems will allow us to react quickly to any changes that may occur and manage any downside risks that may arise.