Markets Resilient
We last wrote about strong data from North American companies but also warned that we see deteriorating global macro data. The war in the Middle East is definitely a game changer, especially if energy and commodity prices continue to remain elevated. We were surprised over the past two weeks how quick equity markets recovered after news of the cease fires, and then the on-again off-again state of the conflict. Global equity markets reacted by erasing all the losses that they had taken since the start of the war, and the S&P 500 set an all-time high last Wednesday. Europe as also been strong. Indeed, Figure 1 presents “all-cap” stocks for the major regions around the world, and as you can see, we have essentially recovered back to and/or surpassed the February 28th levels.
- Figure 1 shows that North American and European stocks have risen past highs from 6 weeks ago by 2-3.5% and the rest of the world is very close. Also, note that US fell less than the others. These are impressive results given how negative and pessimistic the headlines have been.
- We also present Figure 2, to highlight our statement that we see macro data deteriorating somewhat. The chart presents US & UK inflation data, Consumer and Producer prices, which captures the inflation that people and business are experiencing. As you can see with the red circle there is a clear uptick over the past month. We highlight UK producer prices (dark green) that have accelerated faster than the others. This is relevant because the UK is a raw materials importer, so it is easier to see the effect of the conflict in Iran. If the Strait of Hormuz remains closed and commodity prices (Crude, Natural Gas, Fertilizers and Petrochemicals) remain high, we would expect that inflation only goes higher and become more global.
“This means that” the inflation data presented above is only one illustrative example of weaker economic data that we see in our regular reviews. Purchasing Manager Indices and Consumer Sentiment data for example are also weaker. We remain skeptical that the current cease fire and negotiations will lead to a quick reopening and normalization of the commodities prices. We expect the volatility to continue for some time.
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Changes in Leverage. We are increasing the asset ceiling to 2.0 times the market value of equity for Pathfinder International Fund and Pathfinder Conviction Fund to be consistent with Pathfinder Partners’ Fund and Pathfinder Resource Fund.
For more information, please follow the links above to review the fund term sheets.
*All returns are time weighted and net of investment management fees. Returns from the Pathfinder Partners’ Fund and Pathfinder Conviction Fund are presented based on the master’s series of each fund. The Pathfinder North American Equity Portfolio and The Pathfinder North American Income Portfolio are live accounts. These are actual accounts owned by the Pathfinder Chairman (Equity) and client (High Income) which contain no legacy positions, cash flows or other Pathfinder investment mandates or products. Monthly inception dates for each fund and portfolio are as follows: Pathfinder North American Equity Portfolio (January 2011), Pathfinder North American High-Income Portfolio (October 2012) Pathfinder Partners’ Fund (April 2011), Pathfinder Conviction Fund (April 2013), and Pathfinder International Fund (November 2014).
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