Islamic Equity Monthly Report | December

Active Shariah Screened ETFKey Takeaways | December

Following the summer and early Autumn lull equity markets rebounded with alacrity in November as declines in inflation exceeded expectations leading to lower bond market yields as well as renewed hopes of an end to Federal Reserve tightening and possibly even rate reductions.

Markets are now pointing to the initial rate cut occurring sometime in the second quarter of next year. The ECB continued talking a tough game but the equally encouraging inflation figures released across Europe at the end of October gave their protestations the appearance of being behind the curve.

In November theShariah ETFappreciated 9.08% outperforming conventional and Islamic global benchmarks. Energy about which we have written frequently was largely neutral during the month. ETF performance benefitted from the mega-cap tech stocks playing a less significant role Tesla being an exception.

ETF returns were led by companies involved in a variety of activities including Agilent in Healthcare Lululemon Schneider Electric and Wolters Kluwer. Technology wasn’t completely absent as ServiceNow and Intuit also performed well although both companies are more in the realm of business services.

Given the strong performance for the month few stocks detracted from returns in any meaningful way. Two that did were Corteva and Cisco Systems. We believe Cisco remains an interesting opportunity.

Source of all performance data: HANetf / Bloomberg as of 30.11.2023. Additional sources available upon request.Please note that all performance figures are showing net data. Past performance is not indicative of future performance and when you invest in ETFs your capital is at risk.

Have we learned anything?

One interesting phenomenon over the past few years has been how some commentators were exactly right with their predictions at one end of the pandemic spectrum and dreadfully wrong at other. It’s also interesting to consider whether the reasons cited to support their positions were ever valid. Former US Treasury Secretary Larry Summers warned repeatedly of the inflation risk that he believed was emerging due to aggressive fiscal policy during the pandemic. For a time he was able to bask in the warm glow of his prescience until he opined repeatedly that bringing inflation back down would require two years of 7.5% unemployment.

Inflation has now declined to just over 3% in the US while the unemployment rate remains below 4%. If fiscal profligacy was to blame for soaring prices and an overheated economy how has US inflation declined while unemployment remains near 50-year lows? Perhaps the inflation spike resulted not from fiscal policy which was appropriate under the trying circumstances but due to a surge in consumer demand for goods coinciding with historically snarled supply chains. And perhaps the decline in inflation has been due to the unsnarling of those same supply chains absent the need to throw millions out of work.

The intention here isn’t to beat up on Mr. Summers. It’s just to raise the question have we learned anything about macroeconomic management? Indeed one might wonder whether anything done by the Fed either their initial inactivity or their subsequent aggressiveness had any effect. Hopeful homebuyers certainly have a view while the rest of the economy waits for the rate hike shoe to finally drop if it ever will. If higher rates didn’t lower inflation what did? And what was the point of the higher rates? We anticipate such questions will be closely evaluated in the coming years.

Shariah ETFPerformance Table
As of 30.11.2023

1M

3M

6M

YTD

12M

2Y

3Y

SI

Saturna Al-Kawthar Global Focused Equity UCITS ETF

9.08%

1.49%

6.08%

16.16%

11.62%

-5.35%

-6.35%

-1.11%

Please note that all performance figures are showing net data.Source: Bloomberg / HANetf. Data as of 30/11/2023. Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”)

before investing and should refer to the section of the Prospectus entitled &lsquoRisk Factors’ for further details of risks associated with an investment in this product. When you invest in ETFs and ETCs your capital is at risk.