The economy
Europe and the US diverge in pace, though not direction
• The European and US economies post divergent data on economic growth and the evolution of inflation.
• Growth appears to be easing (cooling?) in the US, while improving modestly in the EU, owing primarily to the service sector.
• In Europe, inflation is more controlled than in the US, which may suggest that, for the first time in years, the ECB (European Central Bank) will take the lead on lowering official interest rates in June.
• Regardless, long-term inflation expectations have not surged in either area.
• European and US election schedules—in June and November, respectively—further compound uncertainty with regard to the direction of their corresponding economic policies.
• The debate rages in the European Union about the influence of Europe and its reform agenda in a world increasingly fragmented into blocs, with China and the US at the forefront.
Markets
The worse the economy, the better the markets! Why? Interest rates
• In the wake of April corrections, May saw a significant uptick in stock market indices. This increase occurred as US employment data lost steam.
• The recovery coincides with the publication of earnings reports which, though mixed, reaffirm the leadership of the major tech companies.
• A boost in P/E ratios has also contributed to this positive development. Does this pose a valuation risk? Not in all market segments.
• The following table illustrates the YTD evolution of the EDM Funds invested in equities.
• Bond prices evolve in sync with expectations on the timing and intensity of the forthcoming interest-rate cuts by the central banks.
• In May we saw a recovery in bond prices as interest-rate cuts were confirmed, in amounts greater than those feared in late March.
• Nevertheless, volatility remained high over the course of the month, and in recent days yields have increased (with corresponding price declines): it’s a yoyo!
Investment policy
Maintain caution
• The policy that began a few months ago of parking liquidity and/or low-duration bonds while awaiting better opportunities remains unchanged.
• Caution is motivated by valuations (P/E ratios) that are only justifiable with considerable, sustained EPS (earnings per share) growth in the coming years.
• Thus, the market is particularly optimistic about growth rates remaining high in the tech segment, but an exact long-term determination is difficult. It would, however, be safe to say they won’t last forever.
• Alternatively, as we indicated last month, small and mid-caps are trading at levels that suggest significant undervaluations in historical terms. We believe they pose a low risk.
• We continue to patiently extend the duration of bond portfolios since it appears more likely that interest rates will fall in the medium term, while concerns persist in the short term.
LEGAL CONSIDERATIONS
1) This information, which constitutes EDM advertising, is intended for informational purposes only in accordance with the rules of conduct applicable to investment services in Spain, and is therefore sufficient and understandable for any potential recipient. The information may refer to or entail additional, separate documentation, which you may request from EDM. If this information contains offers of products, financial instruments, or services, recipients may avail themselves to any complementary or additional documentation that enables them to comply with the terms and conditions of the offer in question.
2) EDM Gestión, S.A. SGIIC is a limited liability company under Spanish law registered in the CNMV’s Special Registry of Collective Investment Scheme Management Companies (Registro Especial de Sociedades Gestoras de Instituciones de Inversión Colectiva) no. 49, and in the Commercial Registry of Madrid, under volume 36,739, sheet 52, page M-658.326, with tax identification no.: A-58.217.175. Its activity includes the representation, management, and administration of Funds and Investment Companies located in Spain and subject to Spanish law, in addition to discretionary portfolio management.
3) Recipients of this information must take into account the fact that any result or data provided may be subject to fees, commissions, taxes, and expenses, which may decrease or alter the gross result, depending on the nature of each case.
4) The instruments included in this information are subject to the potential effects of several common causes, including:
. Market fluctuations due to unforeseen circumstances.
. Liquidity risk and other risks that alter the evolution of the investment.
5) This information contains data that reflect the past performance of the cited products. The data is a reference or record used to reach a conclusion, but is in no way an indisputable indicator of future performance.
6) This documentation may contain data based on currencies foreign to the recipient. Therefore, the possibility of an upward or downward fluctuation in the value of the currency and its effect on the results of the proposed product or instrument should be taken into account.
7) To ensure discretionary portfolio management services are provided within the scope of suitability, MiFID regulations require EDM to collect the necessary information regarding its clients’ investment goals, financial capacity, and investment experience and knowledge. To that end, EDM will obtain the information needed to create an investment profile of each client, consistent with their particular circumstances. Regulation does not permit EDM to render discretionary portfolio management services without the information necessary to assess the suitability of its clients
8) To obtain the mandatory legal information, please visit the website of the management company, EDM Gestión SA SGIIC, at www.edm.es. You may also obtain a hard copy of this information upon request, free of charge.
9) All the opinions and estimates provided are based on sources considered reliable. Nevertheless, EDM Gestión, SA, SGIIC cannot guarantee their accuracy or integrity, and does not assume liability for any direct or indirect loss that may result from the use of the information provided in this document.
10) The content of this document is intended for informational and advertising purposes only. It is not and cannot be considered investment advice or legal opinion, nor is it intended to substitute the necessary counsel in this regard or constitute an offer to sell or buy. EDM Gestión, SA, SGIIC advises that past returns are not a reliable indicator of future profitability.
11)
. EDM Inversión/Spanish Equity Fund is a sub-fund of EDM International SICAV authorized in Luxembourg and regulated by the Commission de Surveillance du Secteur Financier (CSSF) (registration number 851). The Management Company is Waystone Management Company (Lux) S.A subject to the supervision of CSSF. The subfund is managed and marketed in Spain by EDM Gestión S.A., S.G.I.I.C. (CNMV registration number 49). This is an art subfund. 8 SFDR. It is a fund with a risk profile of 5 on a scale of 1 to 7. In the last five years, class L has obtained the following annual profitability: 2019: 12.36%; 2020: 10.18%; 2021: 14.52%; 2022: -12.69%; 2023: 17.28%.
. EDM Pointer SA SIL is a free investment IIC authorized and regulated by the National Securities Market Commission (CNMV) (registration number 26) and managed by EDM Gestión S.A., S.G.I.I.C. (CNMV registration number 49). It is a fund with a risk profile of 4 on a scale of 1 to 7. Since its launch on 11/26/2021 and until 12/31/2023, class A has obtained the following annual profitability: 2022: -7.96% and 2023: 13.16%.
. EDM Strategy Fund is a sub-fund of EDM International SICAV authorized in Luxembourg and regulated by the Commission de Surveillance du Secteur Financier (CSSF) (registration no. 851). The Management Company is Waystone Management Company (Lux) S.A subject to the supervision of CSSF. The subfund is managed and marketed in Spain by EDM Gestión S.A., S.G.I.I.C. (CNMV registration number 49). This is an art subfund. 8 SFDR. It is a fund with a risk profile of 4 on a scale of 1 to 7. In the last five years, class L has obtained the following annual profitability: 2019: 30.42%; 2020: 0.28%; 2021: 29.23%; 2022: -17.81%; 2023: 26.01%.
. EDM Global Equity Impact Fund is a sub-fund of EDM International SICAV authorized in Luxembourg and regulated by the Commission de Surveillance du Secteur Financier (CSSF) (registration no. 851). The Management Company is Waystone Management Company (Lux) S.A subject to the supervision of CSSF. The subfund is managed and marketed in Spain by EDM Gestión S.A., S.G.I.I.C. (CNMV registration number 49). This is an art subfund. 8 SFDR. It is a fund with a risk profile of 4 on a scale of 1 to 7. Class L has obtained the following annual profitability: 2023: 21.24%.
. EDM American Growth Fund is a sub-fund of EDM International SICAV authorized in Luxembourg and regulated by the Commission de Surveillance du Secteur Financier (CSSF) (registration no. 851). The Management Company is Waystone Management Company (Lux) S.A subject to the supervision of CSSF. The subfund is managed and marketed in Spain by EDM Gestión S.A., S.G.I.I.C. (CNMV registration number 49). This is an art subfund. 8 SFDR. It is a fund with a risk profile of 5 on a scale of 1 to 7. Since the creation of class L on 01/18/2021 and until 12/31/2023, it has obtained the following annual profitability: 2022: -43.38 %; 2023: 34.92%.
. EDM International Equities FI is an investment fund authorized and regulated by the National Securities Market Commission (CNMV) (registration number 2817) and managed by EDM Gestión S.A., S.G.I.I.C. (CNMV registration number 49). It is a fund with a risk profile of 4 on a scale of 1 to 7. In the last five years, class L has obtained the following annual profitability: 2019: 6.68%; 2020: 1.95%; 2021: 5.07%; 2022: -14.98%; 2023: 24.40%. In 2022 there were significant changes to the policy. Data prior to 2022 is not representative under current investment policy.
