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Good mood on the capital markets

The presumed end of the cycle of interest rate hikes in the US put the capital markets in a good mood and marked the start of the year-end rally. As the economic data also underpinned the picture of a further weakening economy, market participants began to price in interest rate cuts and the "higher for longer" rhetoric became a thing of the past. Geopolitical developments were also ignored by the markets: The stalemate in the Ukraine war no longer played a role and the Israeli ground offensive in the Gaza Strip did not rattle the markets.

As long as oil continues to flow from the Middle East, the impact on the capital markets is likely to be limited. Meanwhile, the reporting season picked up speed: In particular, companies whose outlooks were disappointing were punished. The focus was ultimately on the central bank meetings in the US and the eurozone. As expected, the Fed and the ECB did not raise interest rates. However, the press conferences were interpreted by market participants as meaning that interest rate hikes are no longer to be expected in view of the decline in inflation. The US labor market showed signs of cooling, with fewer new jobs being created and previous months' data being revised downwards.

The headwind from tighter financing conditions due to the interest rate hikes remains strong and is likely to increase in the future, as it always takes time for higher interest rates to impact the real economy. A cautious attitude towards economic development therefore remains appropriate. The German economy developed negatively in the third quarter. The European purchasing managers' indices for the services and manufacturing sectors were also weaker than expected and fell well below the expansion threshold of 50 points.

Weakening economic data and the end of the cycle of interest rate hikes led to falling yield levels and significant price gains for bonds. Government bonds performed best, while the credit segments were unable to keep pace due to their shorter duration. In view of the longer duration positioning and the stronger focus on government bonds, the Moventum portfolios on the bond side were able to participate well in this development. On the equity side, all major equity markets performed positively, led by Europe, as the US equity market suffered from a weakening US dollar from the euro investor's perspective. As the Moventum portfolios are underweighted in Europe and overweighted in the USA, they were unable to fully benefit from this.

The overweighted Japanese equity market performed in line with the market, while the emerging markets were weaker. At style level, the growth segment was ahead in view of the declining interest rate level. With selected funds, the portfolios are sufficiently exposed to this area and benefited. At sector level, the technology sector, which is overweighted in the portfolios, posted above-average gains. Defensive healthcare stocks, on the other hand, were not in demand. The favorable environment for equities and bonds led to price gains in all strategies in the Moventum portfolios. However, the more defensive positioning on the equity side meant that the portfolios only partially participated in this. On the bond side, it was only possible to partially participate in the decline in yield levels, as the commitment to reduce volatility continues to include money market-related strategies.

The PWM portfolio developed positively, which was broadly supported by performance contributions from all components. The market environment benefited the bond and equity funds, almost all of which performed positively. Comgest Growth Europe, which benefited from the outperformance of Europe and the growth segment, led the way. Positive contributions also came from most mixed funds and the convertible bond fund. The gold price developed slightly positively. In the alternatives segment, the Cat Bond fund made positive contributions. The 7orca Vega Return option strategy also benefited from declining volatility levels.



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