Market Round-up
Renewed hostilities in the Middle East pushed oil prices higher and revived inflation concerns, lifting government bond yields across developed markets. The Federal Reserve responded to the inflationary pressures by raising rates for the first time since mid-2023, and investors spent the rest of the month debating when a further rise would follow.
Global equities fell in September, with the MSCI World Index losing 1.2% despite a 3.3% gain in the Nasdaq 100 (USD terms). Market leadership has become increasingly narrow, with S&P 500 breadth falling to the lowest level since the late 1990s. Financials, real estate, consumer discretionary and materials each fell more than 5%. Meanwhile, new analysis revealed that current AI capital expenditure now exceeds previous investment booms, including the railway boom and the dot-com era. As this spending accelerates, investors are increasingly questioning whether the returns will justify the scale of the outlay.
September is traditionally when many companies host investor days and attend conferences. This provides an excellent opportunity to meet with the management teams and assess the operational health of our portfolio companies. We were once more reassured by their excellent cash generation and robust balance sheets, which position the companies well for any coming volatility.
Investment Views
This month, Hugh Yarrow, portfolio manager of the Evenlode UK Select fund, analyses how the fund's free cash flow valuation is as good as it was both post-launch, in the 2009-2011 period, and in the depths of the Covid sell-off in 2020 and why the prospects for the fund to compound at an attractive double-digit rate are very good. He also takes a deeper look at Unilever and RELX as illustrative examples, alongside evaluating new portfolio additions including DiscoverIE, Avon Technologies and Greggs.
Looking further afield, Ben Peters, portfolio manager of the Evenlode Global Dividend fund, discusses the unusual structure of the equity market, and a shift in the mood music which has driven recent performance. He also touches on new positions including GTT, Honeywell, and the return of EssilorLuxottica. Looking further on the horizon, he believes that combining attractive operational and financial characteristics with low valuations creates a margin of safety, but also future value creation potential.
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Important information
Issued by Evenlode Investment Management Limited (Evenlode). Evenlode is authorised and regulated by the Financial Conduct Authority, No. 767844.
Whilst the funds Evenlode acts as investment manager for are available to retail investors via third party providers, please note that Evenlode do not have permissions from the FCA to deal directly with retail clients and the information provided in this newsletter and on the Evenlode website is for information purposes only. If you are not an investment professional you may still wish to visit the Evenlode website to find out information about Evenlode and the funds we manage but we recommend that if you wish to obtain advice regarding the suitability of the Evenlode ICAV for you, you should contact a financial adviser. Applications to invest in any fund referred to on the Evenlode website can only be made through a third party and must only be made on the basis of the offering documents relating to the specific investment.
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Please note, any views represent the opinions of the Evenlode Team as at the time of writing and do not constitute investment advice. Where opinions are expressed they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. This newsletter is not intended as a recommendation to invest in any particular asset class, security or strategy. The information provided is for illustrative purposes only and should not be relied upon as a recommendation to buy or sell securities. Current forecasts provided for transparency purposes, are subject to change and are not guaranteed. Every effort is taken to ensure the accuracy of the data used in this document but no warranties are given.
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The Evenlode ICAV sub-funds are subject to normal stock market fluctuations and other risks inherent in such investments. The value of your investment and the income derived from it can go down as well as up, and you may not get back the money you invested, you should therefore regard your investment as long term. As focused portfolios of between 30 and 50 investments, the Evenlode ICAV sub-funds carry more risk than funds spread over a larger number of stocks. The Evenlode ICAV sub-funds have the ability to invest in derivatives for the purposes of EPM, which may restrict gains in a rising market. Investments in overseas equities may be affected by changes in exchange rates, which could cause the value of your investment to increase or diminish.