Monthly Commentary – September 2022

Jonathan Furelid

Jonathan Furelid

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Finserve Global Security lost during September against the background of broad stock market declines, both in Europe and the US. However, the fund outperformed broad equity indices and benefited from its dollar exposure.

The decline for the fund totaled -3.81 % for the month, which compares with MSCI World TR – 8.31 %, MSCI World IT -11.55% OMXS30 – 4.75% and Nasdaq -10.50%. The fund is up about 7 % for the year as of September 30, while the OMXS30 is down about -25 % and the MSCI World is down -22 %. In this challenging climate, the fund still stands up well in a comparative perspective.

Tech companies' valuations are sensitive to interest rate trends, and the fund's cyber security companies have fallen sharply during the month as a result. The stock market declines have been broad and covered pretty much all sectors. Unfortunately, defense companies and companies with exposure to space have also backed off sharply.

It now feels dark on the stock market, but don't forget that the stock market is forward-looking and takes future developments into account in its values and has perhaps priced in a recession and accompanying effects as a result.

There is consensus that inflation globally is about to turn around and that inflation will come down fairly quickly over the next year. Conventional assessments then claim that interest rates will also fall as a result. The sharp interest rate hikes have severely dampened economic growth, potentially creating a recession and having a major impact on us consumers. As a result, central banks may have to switch to stimulus again relatively quickly. The FED, which has dual monetary policy goals of partly an inflation target of 2%, partly maximum sustainable employment, must therefore also take into account employment and, as a consequence, to a certain extent, the economy. It can therefore mean incentives and a better stock market climate.

We can expect that the stock markets will continue to be volatile for a good while to come. However, our view is that active management and thematic exposure to security megatrends will provide good returns over time.

We believe that our focus on quality cyber companies can deliver even in a slightly weaker economy, especially when cyber security is high on the agenda and prioritized by company leaders.

In our opinion, defense companies with strong cash flows will be able to withstand a possibly continued negative stock market. The future for the sector remains bright.

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