The themes that dominated the month continue into month end

Most of the themes that have dominated the month seem to continue right up to the month’s end. A perfectly acceptable set of earnings from Nvidia was not enough to reignite the company’s share price, leading to a 5% fall and dragging the tech index lower with it. The bar to please investors keeps getting higher. Having said that, compared to some of the moves we have seen this month post earnings from some tech companies, 5% can be considered quite mild. Software service companies, which have had a terrible month, rallied for the 3rd day in a row. Some of the moves earlier in the week felt a bit like a capitulation amongst investors for this sector.

Private credit concerns have impacted market sentiment at times this month; these concerns took a new twist on Thursday. Market Financial Solutions (MFS), a UK-based mortgage-finance firm that collapsed into insolvency, with apparently Barclays and Atlas SP Partners (the structured-credit arm of Apollo Global Management) are two of the primary lenders. Barclays and Atlas SP were part of a group that arranged over $2.7 billion in loans for MFS. This collapse increases concerns regarding loose underwriting standards in credit markets. These credit events are likely to prompt comparisons with the period leading up to the 2008 financial crisis. The cause of the collapse, according to the judge overseeing the case, was the allegations of fraud and double-pledging of assets.

As Netflix announced it was dropping out of the race for Warner Bros, leaving Paramount the winner, there was news of further consolidation in the UK asset management industry, as fund management fees continue to be impacted by the growth of passive funds. Janus Henerson, another well-known UK fund manager, appears to be on the chopping block. Victory Capital Holdings offered to buy the money manager for $57.04 a share, in a move that topped a previous offer from Nelson Peltz’s Trian Fund Management. We commented at the time that Schroders seemed to go a bit on the cheap, as Nuveen paid just over one per cent of AUM. Well, that appears to be borne out here, as Peltz offers Janus values at nearly 2% of AUM.

This month will be noted for the continual rotation away from growth to value sectors. Clearly highlighted as the S&P 500 will finish the month modestly lower, and the FTSE 100 will be up over 5%. Sector rotations this month will have been brutal for some and a godsend for others. Energy consumer staples, and utilities have been the standout performers this month, while tech and consumer discretionary have been the losers.

Finally, I try never to stray into politics, but just to say the Green Party won the Gorton and Denton by-election.