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FFM Fund Newsletter - Apr 2021

April 2021

In line with the beginning of the year, the month of April saw the main stock markets ending positively (S&P 500 +5.29%, Euro Stoxx 50 +1.29%, CAC 40 +3.27%).

After the sharp rise in US 10-year interest rates, which peaked at 1.74% and eventually stabilised at around 1.50/1.60%, it was now the turn of European 10-year rates to show a recovery, albeit slight, but present. For the first time since the start of the pandemic, the French 10-year Treasury bond moved back into positive territory to close April at 0.15%.

Yet again, and as has been the case every time rates were announced on the up since 2009, pessimists are prophesying the resounding comeback of inflation but, so far, they have always been wrong.

We have already addressed this subject in detail in our March letter and will not repeat ourselves here, but we feel it is important to recall two elements:

  • Firstly, it is excellent news that long rates are returning to normal after reaching historically low levels during the peak of the pandemic. This is a sign that the economic situation has now stabilised, after months of uncertainties. The Covid vaccines are effective and are now available to the vast majority of the population.

  • Secondly, from a slightly more technical point of view, a country's 10-year rate is nothing more than the market's projection of what the central bank's 3-month rate for that country or region will be in 9 years and 9 months.

If we extrapolate for the French rate, this means that the 3-month rate in 9 years and 9 months will no longer be -0.5% as it is today, but 0.15%. So yes, a rise in rates is underway, but it is a slow and limited rise for the moment.

On the other hand, it seems that much of the speculative fever has moved from the equity market to crypto- currencies.

As with the SPACs issue, this will definitely end up badly for most speculators, even if we are convinced that the blockchain system is, in some aspects, revolutionary and can be applied to situations that are still difficult to conceptualise at the moment. In the same way as for the Internet in 1993/94: even if no one could predict exactly what would be the outcome, the potential was there.

After a hectic first quarter (the SPACs bubble, crypto-currencies, the implosion of the Archegos fund, etc.), the month of April was a little calmer with a slight slowdown in the euphoria surrounding the 'rebound' stocks. It is probably no surprise that it was at this specific moment that our funds began to outperform the indices again: FFM European Selection gained +4.29%, while FFM American Growth climbed +6.47%.


Fisconsult Fund Management

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