Results of Funds and Strategies for November 2024

Andrei Movchan

Dec 17, 2024

ALL RIGHT

November in international politics and economics brings to mind an American children's joke about a politician: “Q: If a politician loses his left hand and his left foot in an accident, how would he be? A: He will be all right.” It seems that at the beginning of November, world politics, if not lost, then severely damaged its left hands and feet. Trump's dramatic victory and the Republicans' (Trump is not only the second in history US president to make a comeback, not only the first Republican in many years to receive a majority of votes and electors, but also the first in history to be twice named Person of the Year by Time — for what it is worth) was just the beginning — followed by the collapse of the coalition in Germany and the appointment of new elections (and the mood there is significantly more right-wing), a political crisis in France (where the left recently outsmarted the majority of the population and retained power), and the growing popularity of the demand for re-elections in the UK.

On the political front, the Republicans' victory in the US seemed to open a portal to a new world — less than a month later, Russia seriously talked about negotiations with Ukraine, the defeated Hezbollah went for a truce (and in reality for isolation within Lebanon without access to the Israeli border), Russia and Iran virtually ceded Syria (the most important territory for the Middle Eastern axis) to pro-Turkish forces without a fight, Israel advanced its outposts beyond the Golan without a single shot, destroyed the offensive potential of the Syrians and the arms supply channels to Lebanon, and NATO countries, which had been sabotaging their obligation to spend 2% of GDP on defense for years, “suddenly” declared that by 2030 they would spend 3% on the army.

On the economic front, political changes were met with pro-American optimism and light expectations of inflation growth: the correction on American markets unfolded (US stock markets, along with Argentina and Israel, are growing at record rates this year, and November added almost 6% to them); the yields on US government bonds tried to continue growing but failed; and as a result, on December 12 (I am writing this letter on the New York morning of the 12th), the yield on ten-year bonds is exactly equal to their yield on November 1. Low-rated bond indices slightly fell but quickly recovered — it seems the consensus (if there is still a consensus in the markets) sees the Republicans' initiatives as beneficial for corporations, which is not surprising. The market volatility index fell by half to almost minimal values. Finally, the dollar rose against other currencies — by 3% against the pound and euro in particular.

Inflation in the US, by the way, has stabilized (in a bad sense, because everyone expected it to decrease further). The local reason for this is the record US budget deficit for November — Biden, at the end of his term, is giving everyone gifts, because for Democrats now, the worse, the better. But more globally, the Republicans' initiatives are strategically counter-inflationary (such as working on budget cuts assigned to Musk) and tactically (raising tariffs, lowering taxes, costly fighting with migrants, and the resulting increase in labor costs, etc.) — pro-inflationary no less than the Democrats' policies. Consolidation of inflation at current levels and possibly even a slight rollback is a good sign for stocks, especially in combination with tax cuts. This is a bad sign for debt markets, which have long been waiting for rate cuts and may not see them to the extent they would like, but the widening of spreads (risk premiums) should happen anyway, as they are at historically minimal levels.

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In such a situation, when economic problems are obvious, and stock markets refuse to notice them; when positive political changes are combined with increasing uncertainty; when macro indicators have stabilized at levels different from historical averages, what remains for managers to do? Those who compete with the market — to be as close to the market as possible, so as not to lose investors' money on the next unpredictable move; those who create conservative products — to try to be as far from the market as possible, to recover when it falls after losing to it during its rapid growth. This is exactly what we are doing in our products.

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November brought profits to all Movchans’ Group funds and strategies, although those funds that employ a fund of funds strategy showed modest results due to reflecting October's data on stock investments in November (in October, as you remember, markets went down and many funds in our portfolio followed them).

Shares of ARGO SP rose by 0.39 and 0.31%. This year, the fund is on par or slightly below its benchmarks (this is such a conservative fund — its outperformance during corrections is enough for confident leadership over long periods).

The LAIF SP fund (and, accordingly, FLAG FUND and the strategy in IBKR) showed an increase in the range of 0.37–0.49%. This strategy confidently outperforms benchmarks in 2024.

ARQ SP after a slight dip in October showed an increase in stock value in November by 1.68–1.91% — a result quite in line with the best-case scenario. The fund promises to end the year with a return above the target, but I must, as usual, point out that this fund is designed for a target result in the long term, and its monthly results are not very informative.

The share price of GEIST SP increased by 1.8–1.85% in November. For an equity fund, this is a modest result, justified, as mentioned above, by reflecting the October result of funds in the GEIST SP portfolio.

COSSACK FUND (as usual this year) showed a plus of 0.71% — another good year for the fund is ending.

Finally, after the changes made, the FISTR strategy works better — in November, portfolios added 0.48–0.51%. We hope this trend will continue, and in 2025 FISTR will finally become an effective strategy.

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2024 is ending, and in less than a month we will be able to sum it up. Markets will go on holiday in a week, so writing anything about the rest of December is pointless. Our portfolios and funds are doing well in December so far, and we hope that the end of the year will not spoil the optimistic mood that prevailed in the world in November; not only politics but also economics and markets will be all right.

In a month, I will write to you in detail about the past year and, following the general tradition, make a largely insignificant forecast for the coming year (all forecasts mean little, as you surely know). In the meantime, I just want to wish you a Merry Christmas, Hanukkah, and New Year. Successful investments for all of us, good markets, growing economies, peace, and tranquility. And, of course, health, luck, and happiness!

Happy holidays!