News

Rotation from highly valued mega caps and AI stocks to small and mid caps and cheap value stocks is in full swing. The reasons cited are the interest rate reduction cycle in the USA, which will begin in September at the latest, and the rather subdued business outlook of large IT groups. Falling financing costs are generally seen as positive for the mostly highly indebted small caps. The weak economic development of the global industrial sector also speaks in favor of interest rate cuts. There were hopes of at least a temporary upturn here, but these were dashed by disappointing purchasing managers' indices in the USA, Japan and the eurozone. They are now all below the expansion threshold again. In the eurozone, the purchasing managers' index for the services sector also fell against expectations, despite the tailwind from the European Football Championships in Germany and the Olympic Games in Paris. The situation in Germany in particular also remains less than encouraging. The much-noticed ifo business climate index disappointed for the third time in a row in July. China is also unable to get its economic problems under control.  The central bank there is trying to stimulate the weak domestic economy with an unexpected interest rate cut. Only the US economy appears to be unbreakable thanks to open fiscal policy floodgates. In the second quarter, GDP rose by 2.8%, driven by consumer growth and capital investment, which was significantly higher than expected. At the same time, inflation, as measured by the Fed's preferred PCE index, fell slightly on an annualized basis to 2.5 per cent.

In this environment, the Bund yield fell by around 10 basis points and closed the week at around 2.41 per cent. The decline was more pronounced at the short end, causing the yield curve to steepen somewhat, which was also the case in the USA. The first interest rate cut is already firmly expected at the Fed's September meeting. The ECB, which did not turn the interest rate screw in July, also left the door wide open for further interest rate cuts in September. Investment-grade and high-yield corporate bonds followed the positive performance of euro government bonds well.

In this friendly market environment for bond investments, the bond side of Moventum's portfolios also made gains. However, due to their shorter duration positioning, the performance was not quite as dynamic as on the broad bond market. The stock markets suffered from the decline in Mag 7 and other semiconductor stocks. The Japanese stock market and the emerging markets suffered more. The regional focus of the portfolios had a neutral impact. It was noticeable that the value segment outperformed growth stocks in both the USA and Europe. Although the portfolios were able to benefit from this with selected value funds, the overall orientation of the portfolios is still more growth-oriented. Meanwhile, positive impetus came from exposure to European small caps, whose losses were lower than those of large caps. At sector level, negative contributions came from the high weighting in the IT sector, which was partially offset by the underweighting in the consumer discretionary sector and overweighting in the energy sector.

The Moventum portfolios were also unable to escape the negative stock market trends of the last two weeks and all recorded declines in line with market forecasts. The positive trend on the bond side was not enough to more than offset the negative equity component. However, the former was not quite able to keep pace in the positive interest rate environment due to its shorter duration positioning. The negative equity and commodity market performance in the last two weeks also weighed on the PWM portfolio, although all bond funds and both alternative strategies were able to make gains.