How have the markets fared after a volatile March with various bank failures?
The first two trading weeks of the second quarter showed a further decline in volatility on the markets in the context of the Easter holidays. After a turbulent March with various bank failures, market participants are now waiting for the corporate figures for the first quarter in order to better assess the impact on the real economy. On the data front, the reporting period was relatively quiet. Inflation in the USA rose less sharply than expected, but the core inflation rate in particular is stubbornly holding at a high level. Labor market data in the USA were more or less in line with expectations and continue to point to a robust development. By contrast, retail sales had to pay tribute to the persistently high inflation rate. These declined in March and were weaker than expected. Although there are increasing signs of a weakening of the US economy, the latest data do not indicate an immanent recession. In this environment, yields on government bonds rose again somewhat, while the stock markets also developed positively overall. However, the weaker U.S. dollar ensured that a negative sign remained for the local investor when investing in the U.S. equity market. The strong movements on the commodity markets were also conspicuous. The oil price increased significantly after the OPEC+ countries announced a completely surprising production cut. Meanwhile, the gold price was also able to establish itself above the important mark of USD 2,000 per troy ounce.
The bond side of Moventum's portfolios was not negatively affected by the rise in interest rates due to their very short duration positioning. The risk-on environment also caused spread tightening in investment grade and high yield bonds. This was very beneficial to portfolios with high exposures to these market segments.
On the equity side, the portfolios benefited from their overweight positioning in Europe since the beginning of the quarter, where the positive economic momentum continued. The weakest performance was in Japan, which suffered from the weakening yen from a euro investor perspective. Since the beginning of the quarter, Japan is no longer overweighted. The emerging markets are also not really getting off the ground and continue to suffer from the below-average development in China. There, the real economic data show a clear revival of economic momentum after the Covid opening. However, the stock market has not yet benefited from this. In the wake of the rise in interest rates, the "value" segment outperformed, from which a number of our funds were able to benefit. After a weak phase in the first quarter, the healthcare sector, which is overweighted in the portfolios, outperformed again. This was somewhat offset by the weaker performance of the technology and industrial sectors.
In this environment, the Moventum portfolios ultimately benefited from both their positioning on the fixed income side and their exposure to the European equity market, and all posted positive performance. The PWM portfolio was also able to participate in the friendly (European) equity market environment and escape the negative bond market development. The performance contributions were broadly diversified and demonstrate the benefits of a broad diversification across asset classes and investment styles. In the fixed income area, all products performed positively, benefiting in particular from a friendly credit market environment, which more than offset any negative stimulus from interest rate developments. The European value equity fund made significant gains, while the more growth-heavy convertible bond fund declined. The two long/short equity funds also struggled to cope with the market environment. A mix of positive and negative contributions came from the alternatives and mixed fund strategies. Of particular note was the performance of Hansagold, which participated in the significant upturn in gold and silver prices.
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