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FFM Fund Newsletter - Jul 2022

July 2021

Dear Investors, Dear Friends,

Just when everything looked the bleakest, at the end of the month of June, markets started an impressive rebound that lasted all through the month of July, with most indices ending the month at their 30-day high water mark (S&P 500 +9.11%, Nasdaq 100 +12.55%, Euro Stoxx 50 +7.33%, CAC 40 +8.87%). This came on the back of an extremely volatile month of June so, all in all, most indices simply ended up at roughly the same levels they were at on May 31. Volatile markets indeed…and perhaps even more interesting were the moves in interest rates.

Having topped at 3.50% in mid-June the US Treasury 10 Year bond yield plunged all the way to 2.60 at the end of July. Needless to say, such violent moves are quite rare in usually stable government bond land and this reflects the wild gyrations in investors’ minds, going from “inflation is going to keep on going ever higher” to “OMG, a violent recession is coming because the Fed (and other central banks) are raising rates too far, too fast”.

Indeed, as expected, the Federal Reserve did raise rates by another 75 basis points on July 27, bringing the 3-Month rate to 2.50%, causing almost the whole interest rate curve to invert (in the sense that the 10-Year rate is now lower than the 2-Year rate), which is a pretty good indicator of a recession. In fact, technically speaking, we already are in a recession in the US, as defined by two consecutive quarters of negative growth (Q1 and Q2 2022). Needless to say, the same will be true in Europe given the much higher energy prices on this side of the pond. It is almost never different this time, but it just could be different this time since, as we have already written ad nauseam about, this situation is but an aftershock of the March 2020 pandemic (with the Ukraine war on top) and growth numbers have to be taken with a grain of salt since the corresponding quarters in 2021 were extremely (perhaps too) good.

Time will tell, of course, but the strong market rebound goes to show you, once more, that timing the market is the most difficult (some might say impossible) thing to do, as they were absolutely no good news during the month. Even the Q2 earnings announcement were pretty bleak, just less bleak than expected, which was enough to propel stocks higher. What now from here? Well, if some are inclined to believe the worst is yet to come, this is just a dead cat bounce, a trap for investors before the markets turn back south and correct even more, others believe (as we tend to do) that a lot of bad news are now priced in. This could be the beginning of a more sustained move higher that could bring about a flattish 2022. Even in this scenario, you should, however, not expect a straight line up, but rather more volatility and stress.

In this context, the FFM European Selection Fund was up for the relevant period (30.06.2022 to 28.07.2022) by +7.19% vs +5.71% for the Euro Stoxx 50, +6.28% for the Stoxx Europe 600 and +7.03% for the CAC 40. Year-to-date (31.12.2021 to 28.07.2022), the fund is down -18.10% vs –15.03% for the Euro Stoxx 50, -11.28% for the Stoxx Europe 600 and -11.38% for the CAC 40.

As for the FFM American Growth Fund, it was up for the relevant period (29.06.2022 to 27.07.2022) by +6.39% vs +5.36% for the S&P 500, +8.09% for the Nasdaq 100 and +3.77% for the Dow Jones Industrials. Year-to-date (30.12.2021 to 27.07.2022), the fund is down -21.36% vs –15.80% for the S&P 500, -23.30% for the Nasdaq 100 and -11.54% for the Dow Jones Industrials.

The FFM Global Quality Portfolio Certificate ended the month with a spectacular increase of +14.19%, compared to an increase of +10.59% for the MSCI World. Since the beginning of the year, the Certificate has posted a performance of -13.93% against -5.22% for the MSCI World.


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