Markets:

Our funds had mixed performances in October. Altex Quality benefited from the momentum of large companies, +1.21%, while the rest fell moderately: Altex Momentum –0.81%, Altex Growth –1.18%, and Altex Tactical –1.80%. Our DIPS and USD hedging strategies were detractors during the month.

YTD performance is still very positive: Altex Quality +12.48%, Altex Momentum +8.10%, Altex Growth +7.60%, and Altex Tactical +4.57%.

October began with the partial shutdown of the US government: disagreements between Republicans and Democrats on the federal budget brought on the suspension of non-essential activities that depend on the US public administration. Agencies such as the BLS (Bureau of Labor Statistics), which publishes labor market data, were affected, among others. The shutdown also delayed the publication of September’s inflation data, which was not released until October 24 (3.0% annual vs. 3.1% expected, good news for markets).

Trump threatened to raise to 100% the tariffs on China, in response to China’s restricting the exports of rare earth to the US, which in turn was a response to the US’ restricting the exports of semiconductor technology to China. The dispute continues, although there has been a certain de-escalation towards the month end.

A fragile truce was also agreed to by Israel and Hamas. While hostages have been handed over and detainees released, armed operations have continued. Although it has been losing prominence, a final resolution of the conflict does not seem to be close at hand.

Gold reached all-time highs, above USD 4,300 per ounce, in October, before correcting towards the end of the month, when it closed at USD 4,000. Gold is discounting higher inflation than 10-year bonds are, bonds fell from 4.15% to 4.08% during the month.

Corporate earnings have been good: profit growth exceeded expectations and was already above 10% at the end of the month.

Manufacturing and services PMIs remain relatively strong (the expansionary phase of the cycle continues).

The Fed lowered interest rates to 4%. No change in Europe.

Indices rose during the month: MSCI World (in EUR): +4.00%, S&P 500: +2.26%, Nasdaq 100: +4.77%. There was a wide divergence among stocks and sectors this month: large companies fared well, while small ones were hurt and posted negative month-end returns (Russell 2000: –1.15%). Growth outperformed Value, while Momentum and Quality outperformed more defensive factors such as High Dividend and Low Vol. It was a good month for the Technology, AI, and Telecommunications sectors, and a negative one for Retail, Regional Banks, and Gold Mining companies.

Outlook:

October was marked by increasing uncertainty and a trend change in equities, while indices continued to reach new highs. Such divergences are usually followed by falls. However, November has gotten off to a good start after the announcement of an agreement between Republicans and Democrats. The market is resuming its upward trend, backed by strong corporate earnings and lower political tensions. Valuations are demanding, but stock market seasonality, positive in the final months of the year, favors a strong close. Cycle ends can linger, there is inflation, growth, and a neutral monetary policy to consider; there is no reason to anticipate an imminent fall, while market optimism is not extreme. If there were a market decline, our hedging systems would kick in: it was to avoid having to exit markets prematurely that we designed them. If it has already been amply demonstrated that market timing is not profitable in the long term, the logical thing to do is to not do it. In our funds, we systematically rotate the portfolio of companies to preserve the momentum and quality of fundamentals.