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Germany is now in a winter recession, but the Dax has nevertheless reached a new all-time high. At the same time, U.S. tech stocks dominate the headlines thanks to the hype surrounding artificial intelligence. The market capitalization of US chip producer Nvidia rises by more than USD 200 billion after trading hours - more than its cumulative sales in the last 20 years. Once again, developments in the financial markets seem to have become disconnected from the real economy and speculative fever is leading the way.

It remains to be seen when this gap will close again and how strong the reaction on the financial markets will be as the real economy marches ever closer to recession. Stubborn inflation could be problematic. In the U.S., the Federal Reserve's preferred inflation measure, Personal Consumption Expenditure Index, unexpectedly rose again in April. Core inflation is proving resistant to interest rate hikes. Another rate hike in June is therefore likely. Bond markets are anticipating this development, and rising yields are causing bond prices to fall. In Germany, the much-watched ifo business climate index fell more sharply than expected. The companies surveyed assessed the current situation and business outlook as weaker than in the previous month. Germany's statistics office revised GDP growth (Q1 2023) from a previously reported 0% to -0.3%, which is why Germany is now officially in recession, as the economy already declined by 0.5% in Q4 2022. The outlook for further development also remains bleak, as indicated by the weaker development of the Industrial Purchasing Managers' Index for the month of May. At 42.9 points, this is well below the expansion threshold of 50 points.

The bond side of Moventum's portfolios only had to participate slightly in the falling prices thanks to the short duration positioning. The allocated money market funds delivered their stable positive contributions, regardless of the interest rate development. Corporate bonds outperformed government bonds, which also benefited the portfolios. On the equity side, the growth segment, driven by US tech stocks, clearly outperformed the value segment. Accordingly, the technology and communication services sectors, which are overweighted in the portfolios, outperformed. Defensive sectors such as non-cyclical consumer goods, but also the overweighted healthcare sector were not sought after in this environment. In an environment strongly dominated by the performance of mega caps, our cautious positioning in the small cap segment proved to be correct.

Our positions in the emerging markets were unable to escape the underperformance there, driven by the continued weak development in China. Despite the new all-time high in the Dax, the overweight in Europe and in particular the euro zone did not pay off. Unfortunately, Europe lacks the future-oriented tech companies. The development in Japan was positive, although the stock market there was also unable to keep pace with the development in the USA. The friendly stock market development was also reflected in the equity-heavy Moventum portfolios. The bond-heavy strategies were able to significantly reduce price declines compared to the broad market. The PWM portfolio was not able to participate in the market development driven by US large cap tech companies. In particular, the interest rate exposure on the fixed income side and within the blended funds caused negative performance contributions. The gold price also corrected in the environment of a stronger US dollar. Positive contributions from selected alternatives and some fixed income funds (near money market strategies and funds with a credit focus) were able to stabilize performance, but were not sufficient to offset the negative value contributions from the other building blocks. By design, a broadly diversified strategy such as the PWM portfolio, which relies on a variety of alpha sources, will struggle in a market environment whose performance is driven by only a few equity securities. However, the longer-term development shows that such a positioning provides stability, especially in difficult market phases.

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