September 2024

After a difficult start, stock markets rebounded during September. The EuroStoxx 600 ended slightly down at -0.3% while the S&P 500 in Euros rose by +1.2% and the Nasdaq by +1.8% between August 31 and September 30.

Thus, the summer shocks extended a bit into early September before a precarious calm returned to the market. However, the main events of the month will remain the -0.5% cut in the FED’s key rates, more aggressive than expected, and the Chinese fiscal and monetary announcements. We have said it before: two major obstacles still stood in the way of a restart of the global economy, high interest rates on one hand and the Chinese stagnation following the explosion of its real estate bubble on the other. In our opinion, we need not look further for the reasons behind the market’s concerns since last July.

The FED has therefore decided, considering the confirmed slowdown in inflation and the easing of the U.S. labour market, to act with strength and determination, especially since the previous tightening had left us with rates above 5%, which is 3% above inflation expectations. We hope it will stay on this path in the coming quarters.

In a more surprising move, the Chinese government seems to have finally decided that the loss of confidence among its consumers has gone too far. A series of monetary easing measures and fiscal stimulus has therefore been announced at the end of September. The reaction of the Shanghai Composite index, which saw a 12% increase in 5 trading days, was immediate and caught many investors off guard.

The horizon therefore seems to be brightening for growth in 2025, even if we are never safe from an accident, such as a total war outbreak in the Middle East, for example.  As Peter Lynch very aptly said, for the stock investor, there is always a good reason to worry about something…

In Europe, France remains the problem child with a public deficit that is spiralling out of control and a budget austerity to follow that will weigh on growth. Our choice to desensitize most of our portfolios from the “France risk” at the outset of the dissolution in early June turned out to be protective.  Germany is also suffering, but the upcoming Chinese cyclical rebound should help.

In our portfolios, mining companies, such as BHP, have been boosted by Chinese announcements after having heavily weighed on performance all year.  Our residual positions in luxury companies like LVMH and Richemont have also performed well.

Overall, the Clartan funds had a respectable performance in September. Europe was penalized by its higher exposure to France: Valeurs gained +0.9%, Europe declined -1.7%, and Ethos ended flat at 0%. Flexible also finished the month at 0%, and Patrimoine increased by +0.5% thanks to the easing of interest rates.