Market Commentary - October 2024

October ended with a return of +1.6% for the MetaSpace Fund. In September, the FED made a major interest rate cut, and since then incoming jobs data has been stronger than expected. As I mentioned earlier, this data is by far the most important factor. The discussion on the future path of interest rates picked up quickly after the strong jobs data, but calmed down at the beginning of this month when the US labor market data came in weaker than expected.

The FED is expected to make a new rate decision later this week, and the consensus points to a 0.25% cut. The most interesting thing will be to hear what the FED thinks about the future path of interest rates. The resilience of the economy has meant that the market is now pricing in a slightly more cautious pace of rate cuts going forward than previously indicated - see graph below.

The big story at the moment is the US presidential election, which will be decided this week. There is talk of election risk and what the election could mean for the stock market. One interesting correlation is that there has been a correlation between the odds of Trump winning and a positive stock market performance. At the moment, the odds point to a win for Trump. The explanation for this correlation is probably that Trump is pursuing Republican policies of tax cuts and deregulation, which are traditionally positive for the stock market.

At the same time, even if Harris wins, she stands for policies that are not extreme in any way and are likely to work well with the stock market. The worst outcome, however, would be an ambiguous election result with a long aftermath, as the stock market dislikes uncertainty. However, looking back at the last election in 2020, the stock market performed strongly after the election despite all the uncertainty and subsequent turbulence.

In my view, the election may act as a trigger event for some short-term market volatility.

Holdings

The best performing holding was the US medical technology company Procept Biorobotics. The company, which develops advanced robotic systems for the treatment of urological diseases, makes extensive use of AI to automate and increase the safety and precision of procedures. AR also has great potential to complement navigation and training of surgeons. The company has had a very strong trend since about 1 year ago and so far this year the share has gone up about 130%. For October, the return was +18.1%. Investors have great confidence and the company is growing strongly, in the latest quarterly report it reported an increase in turnover of 74% for the last 12 months. It also announced that it had received important FDA (US medical and technology regulatory agency) approvals for a key robotic system. However, it should be noted that the company is not yet profitable, which increases the risks. Procept Biorobotics represents 3.6% of the fund.

On the negative side, we find the French software company Dassault Systemes with a decline of -11.7% for October. Dassault Systemes works a lot with 3D software, among other things, and its largest customer segment - the manufacturing industry - has started to show some weakening in demand. This was evident in the Q3 report released in October, and Dassault Systemes revised its forecast downwards slightly.

What's new?

Here we present one of many news stories in our megatrends section:

A historic moment occurred during the month when Elon Musk's company SpaceX succeeded in the feat of launching its Starship rocket, which then returned to Earth and was intercepted by two huge mechanical arms. Elon Musk himself described the landing as a major step towards the goal of making humanity multi-planetary.

Being able to reuse rockets in this way can drastically reduce the cost of space launches, increasing accessibility and driving growth in the space sector. SpaceX is already reusing parts of its second rocket, the Falcon 9, but has now succeeded in reusing its larger and more advanced Starship rocket - the rocket that will take us to Mars.

After being launched and separated from the spaceship, the Starship returned and was intercepted.