RUFFER INVESTMENT COMPANY
LIMITED
(a closed-ended investment
company incorporated in Guernsey with registration number
41996)
LEI
21380068AHZKY7MKNO47
Attached is a link to the Monthly
Investment Report for February 2024.
http://www.rns-pdf.londonstockexchange.com/rns/4881G_1-2024-3-12.pdf
February saw a continuation of the
AI-fuelled rally with both the S&P and Nasdaq indices ending
the month at new all-time highs. The equity market exuberance was
given a shot in the arm by Nvidia's earnings announcement
mid-month, following which the stock rallied more than 16% in a
day. Nvidia's market value gain on that day alone was greater than
the total value of US gold mining companies. The market jitters
evident around a single company's earnings release hints to us of
an unstable trend that could just as easily surprise to the
downside. This observation makes the derivative protections we hold
especially attractive, albeit they were a drag on performance
during the month.
Equities were a key driver of
performance during February despite our low weight. Notably,
Chinese equity markets rebounded. This turnaround followed an
announcement by the Chinese securities regulator at the end of
January banning stock lending. We believe sentiment and positioning
in Chinese equities has reached extreme lows and this is reflected
in attractive valuations. Furthermore, the incremental support
being provided to asset markets by the Chinese authorities gives us
comfort they are pushing in our direction. This stands in stark
contrast to the setup for US equity markets where, needless to say,
we remain cautious of both valuations and
momentum.
Meanwhile bond yields continued to
rise in February, as expectations for the number of interest rate
cuts in 2024 fell, increasing the divergence between bond and
equity market performance so far this year. Despite this,
long-dated UK inflation-linked bonds were a positive contributor to
performance as the oversold dynamics of January were reversed.
However, our other interest rate sensitive holdings such as gold
mining equities and the yen suffered as yields rose.
Having entered 2024 believing markets
were priced for perfection (aka a soft landing), we are now
watching closely as growth and inflation risks start to be
re-priced. Expectations of a US recession in the next six months
are falling fast, and the pace of disinflation has abated. Looking
ahead, we expect persistent inflation to remain an issue as policy
makers have shown a willingness to deliver a swift and
deep-pocketed response to any economic pain and the most realistic
long term solution to bulging government deficits is inflation. We
continue to position the fund to benefit from this structural
theme, through exposure to gold, inflation-linked bonds and
commodities.
However, our focus in the immediate
future remains on liquidity risks, as central bankers continue to
shrink the size of their balance sheets. Any meaningful fiscal or
monetary support for markets is, in our view, likely only to arrive
after asset prices have been hit. In such an environment, we find
confidence in a portfolio that leans heavily on the attractive real
return available in cash and short dated bonds whilst holding
additional protection to benefit from falling markets.
Enquiries:
Sanne Fund Services (Guernsey)
Limited
Jamie Dodd
Email: RIC@apexfs.group
