The economy: Prolonged US growth
- The prolonged growth in the United States is staggering when we consider the robust figures posted in Q3’23 (+4.9% annual rate) and compare them to the EU’s lethargic growth, weighed down by Germany.
- Many observers, however, believe the US will be unable to maintain this pace in 2024 and foresee the onset of a recession in the first half of the year. Should one materialise, it would be the most anticipated recession in history.
- Regardless, the negative impact on GDP would likely be insignificant, given current unemployment levels, at historic lows both in the US and the EU.
- The central banks are hinting at a conclusion to the cycle of interest-rate hikes, trusting that the rise in government bond yields will exempt them from continuing their restrictive policies.
- For the moment, the war in the Middle East between Israel and Hamas has not triggered a spike in oil prices.
- Despite the occasional setback, inflation is declining, though some observers believe it is too soon to drop our guard.
Markets: Anxiety persists
- Stock markets declined in October, with investors convinced that interest rates would remain high for some time.
- Expectations about the end of the prolonged, radical restrictive cycle of the Fed and ECB constitute the main source of anxiety, not only on stock markets, but also on debt markets, where yields have skyrocketed. It is worth remembering that yields move inversely to prices.
- The table below illustrates the monthly and year-to-date results for the EDM funds.
- Volatility is very high and its direction depends on investors’ shifting interpretations of the decisions and statements made by the central banks.
- With regard to private bonds, those of higher quality operate like public debt, while high-yield alternatives offer insufficient spreads in recession scenarios.
Investment policy: Dependent on interest rates
- We continue to favour a prudent approach in light of the tense geopolitical situation and, to that end, we have returned to the weighting detailed in the various portfolio mandate profiles.
- In other words, assets with low volatility and sufficient remuneration. In this respect, our portfolios are diversifying.
- Nevertheless, we remain confident that our selection of quality shares will achieve sufficient asset appreciation to beat inflation.
- Third-quarter 2023 earning reports have not been stellar relative to 2022, but they are healthy nonetheless and within the range of our estimates. Thanks to prudent stock picking, we have been able to avoid the sharp declines that result when reported profits disappoint.
- Once there are indications that the cycle of interest-rate hikes is drawing to a close, markets will settle down.
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.U. 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, S.A.U. SGIIC, at www.edm.es. You may also obtain a hard copy of this information upon request, free of charge.
9) Nothing in this document constitutes investment advice, nor does it include any representation about the suitability or appropriateness of any investment or strategy for your particular circumstances, and no personalised recommendation can be derived therefrom. Under no circumstances will decisions based on this information and possible legal, financial, fiscal or other consequences imply any liability for EDM Gestión.
