Markets:

After the storm, came the calm, or rather, the buying urgency. The recovery in May was almost as fast as the fall had been.

Spectacular performance of our Funds (between +8.11% and +3.31%) and of the Altex DIPS hedging strategy itself, which has managed to keep most of the gains accumulated during the crisis (Altex DIPS on S&P 500 +9.16%, Altex DIPS on Nasdaq 100 +6.49%, YTD).

Trump exposed his negotiation weakness postponing the application of tariffs, while urgently seeking bilateral agreements. The world interpreted he was not willing to risk harming himself, just to weaken his trade enemy. Although the battle is far from over, markets have already sized Trump up, and it is unlikely they will react so drastically in future disagreements.

The other colorful note of the Trump administration was the abrupt fracture with Elon Musk, who was frustrated by what he considered an inadequate reduction in government spending, and the foreseeable increase in deficit, driven by higher defense expenditure. Trump and Musk exchanged threats and criticisms on social media, much to the delight of the public, and to the dismay of investors.

Meanwhile, Jerome Powell (Federal Reserve) remained steadfast, leaving rates at 4.5%. He warned of the risk tariffs could have on inflation and growth, reminding all that it is impossible to make accurate predictions. To the general relief, the Fed seems to have, in fact, unloaded its balance sheet to its planned target and is now able to help in the next recession. However, if there is a spike in inflation, matters could be aggravated since rates are at sufficiently restrictive levels and the fragile equilibrium with which the mythical Soft-Landing has been undeniably achieved, would be upset. Inflation and growth data continue to show robustness and control, tending to moderation.

Indices rose sharply in the month, from +9.81% for the Nasdaq 100 to +3.79% for the Eurostoxx 50. The S&P remained at +6.59% (data in local currency, USD for the US). By company size, the top 50 rose more (+8.50%) than the S&P 500 equal weight (+4.39%). Medium-sized and small companies ended the month up around +5%.

By factors, Growth, Momentum and Quality gained (+9.6%, +7% and +5.15%, respectively). Lagging behind were Value (+4%), High Dividend (+2%) and Low Vol equities (+1%). Among the smaller companies, Growth (+7.2%) stood out.

Outside the US, results were more modest, although positive: China and Japan around +5%, Brazil and India, 1.3% and 1.8%, respectively.

Bond yields remained fairly sideways in the month. US10Y fluctuated between 4.4% and 4.6%, and the GR10Y between 2.4% and 2.7%. Europe lowered rates to 2.4%, while expansionary messages continued.

The USD threatened to appreciate mid-month but fell back. EURUSD appreciated, and closed at 1.1346, breaking the sideways band in which it has been moving for the last 3 years.

Outlook and positioning:

Bull markets continue, and the sectors that led economic growth in the past few years are showing signs of strength. Inflation is under control and growth is moderate. The economic expansion cycle will continue until data prove otherwise.

We have rebalanced the Funds following the release of first quarter corporate data. We remain overweight in Industrials, highly specialized Technology and Consumer Discretionary. We increased our position in the Healthcare sector, being very selective in terms of type of company, quality and momentum. Big Pharma are threatened by the Trump administration’s price intervention. We continue to hold Gold Miners and Cyclical companies.

The USD remains, for now, 100% hedged in all three Funds. Our EURUSD trend strategy was triggered, giving bullish signals, although it could still move sidewise given the higher attraction, in terms of yields, of USD vs EUR.