Torsten Asmus/iStock via Getty Images In the first five months of 2024, Fundamental Value returned -10.9% net of fees, significantly underperforming the S&P 500's ( SP500 , SPX ) return of 11.3%.
FV is now up 388.0% net since inception in 2016 vs the S&P at 190.7%, an annual outperformance of 7.
7%. 1 For monthly performance see our tearsheet . Our 2024 returns thus far have been extremely disappointing.
However, despite this underperformance - in fact, because of it - we are feeling increasingly encouraged about the prospect of strong relative returns in the future. We have doubled down on our strategy of differentiating ourselves from the S&P. We have increased the scale of our investments outside the US, and added to our short book inside the US.
Much more below. Market commentary In our last letter , we wrote that the market was pricing in an immaculate landing: Equities are priced for a Goldilocks economic scenario: not too hot, not too cold. A hot economy with stubbornly elevated inflation is a problem for valuations.
A cold economy with recession is a problem for earnings. Our personal view is that the too-hot scenario is the most likely - the labor market and hence the consumer remains extremely strong - but either outcome seems possible. At that time, the market was pricing in nearly six rate cuts to the federal funds rate for 2024.
We pointed out that six cuts in a year is typically associated with a sharp recession - "totally incongruent" with expectations for 10% S.