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FFM Fund Newsletter - May 2021

May 2021

Market performances were quite uneven during the month of May on both sides of the Atlantic. In Europe, the markets maintained their growth momentum (Euro Stoxx +2.41%, CAC +3.42%), while in the United States, the indices stalled, mainly due to the decline in technology stocks (S&P 500 -0.25%, Nasdaq 100 -2.24%).

Interest rates have finally stabilized and are back to end of April levels in both Europe and the U.S., easing concerns about a rise in inflation, even though the vaccination campaign and economic recovery could ultimately have an impact on prices.

It is interesting to note that products like SPACs and cryptocurrencies which have been the main speculative subjects since the beginning of the year, have dropped during the month.

As we had previously stated, speculative bubbles are always an integral part of financial markets, which is fine as long as they do not grow to sizes that can threaten market stability (as was the case with the internet-telecom bubble in 1995-2000).

In this context, the significant and rapid drop in the indices is most welcomed. Bitcoin, in particular, fell by 49% during the month, from USD 60,000 to USD 30,000 within only eleven days, to finally stabilize at around USD 35,000 at the end of the month. The leading crypto- asset had previously, on various occasions, corrected by up to 80% in the past: this is not a first occurrence.

The key difference though is that this time crypto currencies as a whole are valued at several trillions of dollars and will therefore need to be monitored in future. Some financial institutions are now allowing these cryptocurrencies to be pledged against short-term loans.

The margin calls have sometimes been massive and some speculators were, no doubt, not able to recover. This is further aggravated since crypto-currencies are traded continuously, 24 hours a day, 7 days a week.

Since the rest of the financial sector is opened only at intermittent hours and never on weekends, these must have arisen some complex situations that needed to be reconciled when the markets reopened after a hectic weekend.

It is not to be excluded that some financial intermediaries have also lost some of their feathers in the battle. We obviously continue to follow closely the evolution of these new markets and assess their potential, direct or indirect, impact on our investments.

We maintained an outperformance over the indices during the month of May, with a +3.19% increase for FFM European Selection and +0.46% for FFM American Growth.


Fisconsult Fund Management

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