Dear Investors, Dear Friends,
November continued the improvement first seen in October, with the S&P 500 up +5.38% and the Nasdaq 100 up +5.48% on the other side of the pond while in Europe the Euro Stoxx 50 was up +9.60% and the CAC 40 was up +7.53%. This time, the background was different to that of October, as inflation indeed came in lower than expected and some central bank officials adopted a more nuanced tone to interest rate hikes. At the same time, quarterly earnings generally came in better than expected, which also offered some tailwind for the markets.
It seems we have now pivoted from fearing persistent and elevated inflation to fearing an economic slowdown, indeed even a recession across developed economies. As of now, no such recession seems to be forthcoming, as even the European Union Q3 GDP came in at a higher than expected +0.3%.
When talking of recession odds, most pundits now point to the US yield curve inversion. A yield curve is said to be inverted when short-term interest rates (the 3-Month rate and 2-Year rate, in particular) are at higher levels than long-term rates (essentially the 10-Year rate). Historically, these inversions tend to precede and anticipate recessions by a few months and their track record is remarkably good. Indeed, in the US, we had an inversion in late 2019 that anticipated, before anybody else was even aware of it, the short-lived Covid recession of March 2020.
Right now, the inversion is very pronounced and therefore it seems evident a recession is just around the corner. One must always be careful before saying “this is different” but it is possible that this time is actually different if one assumes, as we have always done, that the current ups and downs are still mostly due to the 2020 pandemic and its aftershock effects. Time will tell, but it could just be that inflation comes down and we do not experience a recession.
The FFM American Growth Fund was up for the relevant period (26.10.22 - 30.11.2022) by +8.28% vs +6.51% for the S&P 500, +5.47% for the Nasdaq 100 and +8.64% for the Dow Jones Industrials. Year-to-date (30.12.2021 - 30.11.2022), the fund is down -22.19% vs -14.62% for the S&P 500, -26.78% for the Nasdaq 100 and -4.97% for the Dow Jones Industrials.
The FFM European Selection Fund was up for the relevant period (27.10.22 - 01.12.2022) by +7.85% vs +10.54% for the Euro Stoxx 50, +8.23% for the Stoxx Europe 600 and +8.17% for the CAC 40. Year-to-date (31.12.2021 - 01.12.2022), the fund is down -19.67% vs -7.30% for the Euro Stoxx 50, -8.99% for the Stoxx Europe 600 and -5.58% for the CAC 40.
The FFM Global Quality Portfolio was up +6.75% for the month compared to +2.51% for the MSCI World EUR. Year-to-date, the certificate is down -18.01% vs -7.01% for the MSCI World EUR.
The FFM Swiss & Nordics Portfolio was up +4.34% for the month compared to +4.51% for the SMI Mid-Cap Index (SMIM). Year-to-date (25.10.2022 - 30.11.2022), the certificate is up +3.33% vs +3.04% for the SMIM.
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