Hugo Angelo Lucien Manenti @hugomanenti95: "𝗠𝗼𝗻𝘁𝗵𝗹𝘆 𝗨𝗽𝗱𝗮𝘁𝗲 — 𝗢𝗰𝘁𝗼𝗯𝗲𝗿 𝟮𝟬𝟮𝟱 Dear..."

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𝗠𝗼𝗻𝘁𝗵𝗹𝘆 𝗨𝗽𝗱𝗮𝘁𝗲 — 𝗢𝗰𝘁𝗼𝗯𝗲𝗿 𝟮𝟬𝟮𝟱 Dear all, October was a bit of a lull, the government shutdown delayed some key data, limiting visibility just as macro tensions were rising. Markets continued to grind higher, but several dynamics suggest we may be close to entering a more complex phase. On one side, capital investment remains strong, monetary conditions are still loose, and Q3 earnings have been broadly constructive. On the other, household strain appears to be increasing, future rate policy remains uncertain, and market leadership is narrowing. We’re not drawing hard conclusions yet – but the crosscurrents are worth monitoring. Those are often what we call late-cycle dynamics. 𝗜. 𝗠𝗮𝗰𝗿𝗼 & 𝗣𝗼𝗹𝗶𝗰𝘆 𝗧𝗵𝗲𝗺𝗲𝘀 🔹 𝗜𝗻𝗳𝗹𝗮𝘁𝗶𝗼𝗻 𝗽𝗿𝗲𝘀𝘀𝘂𝗿𝗲𝘀 October’s CPI surprised slightly to the downside, helped by moderation in shelter. That said, core inflation remains above the Fed’s target, and there’s little evidence that inflation is on a sustained path to 2% – and I don’t expect it to get there. 🔹 𝗟𝗮𝗯𝗼𝘂𝗿 𝗺𝗮𝗿𝗸𝗲𝘁 𝘀𝗼𝗳𝘁𝗻𝗲𝘀𝘀 Private employment data continued to trend lower, with job creation appearing to slow and a growing number of layoffs. While a slowdown in migration and labour force participation has kept unemployment stable, data is undeniably weak – particularly among younger and lower-income groups. 🔹 𝗙𝗲𝗱'𝘀 𝗵𝗮𝘄𝗸𝗶𝘀𝗵 𝗰𝘂𝘁 The FOMC cut rates by 25bps this month, but Powell’s press conference leaned hawkish. Concerns about persistent inflation, policy credibility, and external risks were all noted. The Fed’s path forward remains data-dependent, and somewhat unclear. 🔹 𝗨.𝗦.–𝗖𝗵𝗶𝗻𝗮 𝘁𝗿𝗮𝗱𝗲 𝘁𝗿𝘂𝗰𝗲 The Summit between Trump and Xi apparently went well, and both leaders agreed to kick the can of export controls down the road. I do expect it to be a theme going forward – episodic and growing tensions that go to the wire but eventually get resolved. A managed divorce. 𝗦𝘂𝗺𝗺𝗮𝗿𝘆: Overall, the macro environment still supports positive risk asset performance. But the outlook is clouded by policy ambiguity, valuation concerns, and signs of consumer fatigue. 𝗜𝗜. 𝗠𝗮𝗿𝗸𝗲𝘁 & 𝗣𝗼𝗿𝘁𝗳𝗼𝗹𝗶𝗼 𝗣𝗲𝗿𝗳𝗼𝗿𝗺𝗮𝗻𝗰𝗲 $SPX500 : +2.4% IJR (Small Caps): –1.2% Our Portfolio: +5.5% Market leadership remains narrow. Large-cap tech continues to attract flows, while small caps and value-oriented names struggle. In that context, our relative outperformance this month was encouraging. 𝗣𝗼𝗿𝘁𝗳𝗼𝗹𝗶𝗼 𝗵𝗶𝗴𝗵𝗹𝗶𝗴𝗵𝘁𝘀: 🔹 𝗪𝗘𝗦𝗖𝗢 $WCC (WESCO International Inc) Reported strong Q3 earnings, with datacenter-related revenues (c. 20% of the business) continuing to grow at 50% p.a. While not yet widely recognised as an AI beneficiary (as mentioned last month), WCC’s exposure to datacenters, power infrastructure and critical electrical components should attract more attention going forward. 🔹 ProPetro $PUMP.US (ProPetro Holding Corp) Surprised positively with strong results, largely driven by the expansion of its new Power Solutions division. The market had been slow to appreciate this development (announced back in December 2024!), but recent contract wins shifted sentiment dramatically. 🔹 Herc Holdings $HRI (Herc Holdings) Posted a stable quarter, with margin performance and integration progress from the H&E acquisition both tracking well. Large infrastructure and non-residential construction projects remain supportive for the medium term, while merger synergies will have a material positive impact on earnings. A good name to take advantage of increased capital investment across the economy. 🔹 Transocean $RIG (Transocean LTD) Earnings confirmed steady operational improvement and ongoing balance sheet repair. While the near-term offshore cycle remains muted, visibility for 2026–28 is improving. Execution is so far solid. I made no major allocation changes in October, continuing to concentrate capital in high-conviction names within infrastructure, industrials, and energy services. 𝗜𝗜𝗜. 𝗖𝗼𝗻𝗰𝗹𝘂𝘀𝗶𝗼𝗻 October highlighted many of the macro and market themes I’ve tracked for some time: multi-speed economy, sticky inflation but supportive financial conditions, and a narrow but still-positive equity market. We may be entering a transition phase – potentially toward a different growth model, one less reliant on household consumption and more centered on investment and production. If that’s the case, volatility may increase as markets adjust. For now, I remain constructive but cautious. Liquidity is still ample, earnings are holding up, and valuations – while very elevated in some areas – are still reasonable across much of the market. Our portfolio is positioned accordingly, and I continue to monitor the data closely. As always, I welcome your thoughts and questions. All the best, Hugo