It’s Only When the Tide Goes Out That You Learn Who Has Been Swimming Naked

As we navigate through the first quarter of 2024, we’ve witnessed a market characterised by volatility. Valence Global Fund has demonstrated resilience despite the challenges, closing the quarter on a positive 10.2%. However, the broader market has shown signs of weakness, influenced by a convergence of global events.

The primary factors contributing to market instability are as follows:

  • Persistent inflationary pressures in the US.
  • Ongoing conflicts in the Middle East.
  • The unresolved situation between Ukraine and Russia.

The most significant of these, the US inflation figures, have impacted the Federal Reserve’s rate cut outlook, leading to a shift in investor sentiment.

The US Federal Reserve has indicated a propensity to maintain interest rates for an extended period before considering any reductions. This cautious approach has resulted in a sell-off of both equities and bonds.

Despite the current headwinds, the market continues to be driven by advancements in Artificial Intelligence (AI) and the anticipation of rate cuts. The European Central Bank (ECB) has hinted at a potential rate cut commencing in June 2024, which could catalyse market movement.

The principal risks facing the market today are the spectre of war and the impact of inflation. Market fluctuations are inevitable, with days of gains and losses being inherently unpredictable. Nonetheless, our conviction remains that profitability and liquidity will persist as the fundamental drivers of the global economy.

Aligned with our investment philosophy, we focus on companies demonstrating a strong track record of earnings persistence and market power. Our holdings exemplify these qualities. Rather than setbacks, we consider significant price declines as opportunities to reinforce our positions.

We remain diligent in monitoring the market and are prepared to act in the best interests of our investors. As our favourite investor once said, “It’s only when the tide goes out that you learn who has been swimming naked.”