Interest rate decision by the "hawk" characterised as "dovish rate hike".
While the pause in the rate hike cycle announced by the central bank in the U.S. last week had been expected, the ECB's decision was on a knife edge. In the end, the "hawks" were able to push through a rate hike of 25 basis points to 4.5 percent in the main refinancing rate - probably the last increase for the current interest rate cycle. Accordingly, the decision was characterized as a "dovish rate hike."
In the U.S., the end of the rate hike cycle does not seem to be a foregone conclusion. The next meeting in November could see what is likely to be the last rate hike on the agenda. At least, this is how the upwardly adjusted dot plot of the central bank members can be interpreted. Fed President Powell also underlined the new mantra of "higher for longer" in the press conference, which bitterly offended market participants who were speculating on interest rate cuts in the near future. Accordingly, government bond yields continued to rise, causing losses for bond investors. The rise in the oil price also contributed to this, fueling fears of a new surge in inflation. This was already reflected in the August inflation data in the USA, which rose again more strongly on a monthly basis. Other economic data in China recently showed stabilization at low levels, including industrial production and retail sales. In the long term, this could also have a positive impact on exports in Germany. Accordingly, the expectations component of the ZEW index, for example, improved slightly, contrary to the consensus.
Initial estimates for the purchasing managers' indices in Germany also showed slightly rising values for the services sector and manufacturing, which were higher than the previous month's results and above the consensus forecasts. As already mentioned, the "higher for longer" rhetoric caused capital market interest rates to rise. Moventum portfolios were able to limit losses on the fixed income side thanks to their shorter duration positioning. Exposure to spread sectors such as investment-grade and high-yield corporate bonds, among others, was also helpful, where spread narrowing even generated gains in some cases. Short-dated and near-money market strategies also contributed positively to performance.
On the equity side, European indices outperformed those in the U.S., which benefited from a stronger U.S. dollar from a euro investor's perspective but were more negatively affected by rising interest rates. The Japanese market - overweighted in the portfolios - outperformed and performed positively. In its last meeting, the Bank of Japan did what it does best: namely nothing. An end to the negative interest rate policy is thus not in sight. Emerging markets thus outperformed industrialized countries. In the case of the latter, both in Europe and in the USA, the "growth" segment, and with it technology stocks, lost out in view of the interest rate development. Value, on the other hand, outperformed.
Although the Moventum portfolios could not completely escape the environment of negative equity and bond markets, they outperformed the market thanks to selected fund positions on the bond side and positive allocation contributions on the equity side (including Japan and emerging markets).
The PWM portfolio held steady in the face of headwinds from the equity and fixed income sides. Positive developments in alternative strategies, among others, contributed to this. In fixed income funds, credit-heavy funds and short-duration/floaters showed positive performance and only the more duration-heavy fixed income funds underperformed. In equities and convertibles, all funds performed in line with the market. After a prolonged dry spell, the gold price again made a slightly positive contribution.
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