10 January 2024

Citius, Altius, Fortius?

While investors can naturally rejoice over the rally across asset classes at the end of 2023, the end-of-year market action brings a lot of stocks back to stretched levels of valuation.
The unprecedented rate hikes of the last 18 months still impact our economies with the traditional lag, the Eurozone being expected to almost stagnate in the last quarter, and risks to next year’s growth still abounding. 
The short squeeze in the last two weeks of the year - which led the most shorted US names up more than 20% on the month or 15% above the broad Russell 3000 - is remarkable in these conditions. Speculation is high across Equity markets, as many indices reach new highs at the end of the year, and history shows these moves tend to be followed by reversals for low-quality names. The recent move is very similar to the market action of last July, and many non-profitable growth names look very vulnerable again.

the end of year speculative short squeeze

Value opportunities also abound within Emerging Markets Equities - where China is finally making a comeback into our strategies - within EM Debt and across developed Small/Mid Caps after their large respective under-performance. 
This dispersion in valuations across the market offers strong opportunities for active investment and we are looking forward to uncovering compelling return opportunities for our investors.

Our Quality and Value tilts -structurally embedded into our Systematic Equity strategies- and key dimensions in our Credit, Global Bond and Multi-Asset strategies should help us manage the potential volatility of this late phase of the cycle.
We remain focused on enhancing our research and investment platform while diversifying our strategies across frequencies and asset classes and are keen to engage with you on the value-added this will bring to our investment processes. In the upcoming months, we will share some research elements on topics such as Large Language Models fine-tuning for news-flow-based stock predictions, volatility term-structure inefficiencies, and credit default swaps’ cointegration.

Emmanuel Hauptmann
Partner, CIO & Head of Systematic Equities



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