Dear Investors, Dear Friends,
The month of September turned out to be just as bad or even worse that August (S&P 500 -9.34%, Nasdaq 100 -10.60%, Euro Stoxx 50 -5.66%, CAC 40 -5.92%). After an initial rebound, the latest US CPI prints (for the month of August) came in higher than expected. This was reinforced by a slew of speeches by Federal Reserve officials highlighting that rates were definitely going higher in the near future, come hell or high water. In Europe, the new UK government unveiled fiscal measures that were taken extremely badly by the UK bond market, with the 10-Year Gilt yield spiraling out of control before the Bank of England had to step in as some pension funds were facing margin calls.
All in all, 2022 is really a year that has investors ground down little by little. Perhaps, more surprisingly, is that volatility has been highest in the bond market, much higher than in the equity market. For example, the 10-Year US Treasury Bond went, during the month, from 3.20% to almost 4%. That implies a loss of 5.3% in bond value. And this is one of the most liquid markets in the world. As of now, 2022 is the fourth worst year in the government bond market in 322 years (the worst ones were 1721, 1865 and 1920, for those keeping score at home). There truly has been no place to hide this year, except perhaps commodities and mostly energy commodities at that (copper, for example, is down 23% for the year).
All this means that we are still, on the equity side, in that consolidation period we were writing about last month. Since the Volatility Index (VIX) keeps on hovering around 32, this implies daily 2% up or down moves and that is clearly what we are seeing right now. When will this end? When will investing stop feeling so unpleasant as it feels right now? Well, no one knows, but we will get more signposts in October as new CPI numbers (for the month of September) will be announced and companies will start their quarterly reporting. What is clear is that the mood is extremely negative, with rumors of a Credit Suisse bankruptcy flying around which is supposed to be 2022 “Lehman Moment” but which seems clearly unsubstantiated. Many investors are pushing this 2008-like scenario but is seems extremely hard to fathom, especially since the financial sector in developed markets is in very good health (because of all the regulations put in place after 2008). We can only repeat that what this looks most like to us is 1997-98, with a very strong US Dollar that is having an extremely negative effect on emerging markets (back in 1997-98 it was Russia and then South East Asia).
Let’s have a look at how our funds performed in September.
The FFM European Selection Fund was down for the relevant period (01.09.2022 to 29.09.2022) by -5.42% vs -4.03% for the Euro Stoxx 50, -6.08% for the Stoxx Europe 600 and –5.92% for the CAC 40. Year-to-date (31.12.2021 to 29.09.2022), the fund is down -29.27% vs -23.72% for the Euro Stoxx 50, -21.51% for the Stoxx Europe 600 and -20.64% for the CAC 40.
As for the FFM American Growth Fund, it was down for the relevant period (31.08.2022 to 28.09.2022) by -7.52% vs -5.97% for the S&P 500, -6.34% for the Nasdaq 100 and -5.80% for the Dow Jones Industrials. Year-to-date (30.12.2021 to 28.09.2022), the fund is down -29.44% vs -22.18% for the S&P 500, -30.04% for the Nasdaq 100 and -18.45% for the Dow Jones Industrials.
The FFM Global Quality Portfolio certificate was down by -7.05%, in line with the MSCI World which lost -7.07%. Since the beginning of the year, the certificate lost -19.99% against -14.56% for the index.
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