Positive surprise in the USA - bleak outlook in Germany
Unimpressed by the geopolitical trouble spots and the prospect of a new Trump presidency, the US S&P500 index climbed to a new all-time high - driven by the index-dominating tech heavyweights. The soft landing narrative ensured confidence and rising share prices even in an environment of slightly higher interest rates. The US GDP figures for the fourth quarter came as a positive surprise: with annualized growth of 3.3%, the US economy performed significantly better than expected at the end of the year.
Thanks to robust private consumption, there are currently hardly any signs of a significant slowdown in growth momentum. The situation in Germany, on the other hand, is less encouraging. In 2023, GDP fell by 0.3% compared to the previous year. The outlook also remains bleak. The Ifo business climate index fell for the second time in a row in January. The consensus had expected a slight increase. In view of the ECB's ongoing restrictive monetary policy and the lack of political will for necessary structural reforms, the negative sentiment is unlikely to change much. This is another reason to diversify investments globally using Moventum portfolios and to avoid the home bias. While the ECB remained inactive at its last meeting, as expected, its rhetoric hinted at an imminent easing of monetary policy. Depending on the development of inflation over the next few months, it remains to be seen whether the first interest rate cut will take place in April or June.
The US Federal Reserve is meeting this week. The markets are hoping for new insights into the path of interest rate cuts. The good economic data caused interest rates to rise slightly once again. The 10-year German Bund was back above the 2.30 percent mark, while the 10-year US Treasury bond closed at around 4.15 percent. Thanks to the risk-on environment, investment-grade corporate bonds and high-yield bonds performed positively and escaped the negative influence of duration thanks to spread tightening. Moventum portfolios are overweighted in both segments compared to government bonds. The shorter duration positioning was helpful.
On the equity side, the overweighted US equities in the Moventum portfolios outperformed, also thanks to the tailwind from a stronger US dollar. This contrasted with the negative performance of the overweighted Japanese equity market. There was a lack of stimulus from the Japanese central bank. The emerging markets, which are underweighted in the portfolios, continued to perform negatively, led by China. Despite the rise in interest rates, growth companies in the USA and Europe outperformed. The performance was led by the mega caps from the IT and communication services sectors, which are overweighted in the portfolios. The defensive healthcare sector was not in demand. In a market environment dominated by large and mega caps, the avoidance of small caps as far as possible proved to be advantageous.
The friendly equity market environment has led to price gains in the equity-heavy Moventum portfolios over the past two weeks. The bond-heavy strategies also performed well despite the interest rate headwind. The shorter duration and credit additions ensured outperformance. On the equity side, we benefited from our exposure to the USA and sector positioning. The growth orientation also proved to be advantageous. The PWM portfolio performed well over the past two weeks, with almost all portfolio components contributing to this. Among the alternatives, the Cat Bond fund benefited from its high carry, while the negatively correlated Aquantum performed negatively. The mixed funds benefited from the good equity market performance and the low duration exposure. Among the bond funds, the credit-heavy strategies and the short-duration/floater funds performed positively and compensated for the negative contributions of the duration-heavy funds from FvS and BlueBay. Equity strategies developed positively, with Comgest and GQG in particular benefiting from their growth orientation. The gold price trended sideways in the reporting period.
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