Strong US labour market data prove recession prophets wrong
Once again, strong labor market data from the US proved the prophets of recession wrong. Together with the upward revision of July and August data, the US labor market continues to show great stability. Without fears of job losses, spending among US consumers is likely to remain high - a key driver for the US economy.
The much-watched ISM purchasing managers' surveys also came in above expectations for the manufacturing sector and in line with expectations for the important services sector. The latter continue to quote above the 50-point mark, indicating expansion in the sector. The positive development of new orders in US industry confirmed the picture of stable real economic development. Meanwhile, in Germany the Ifo business climate index stabilized at a low level, with the outlook in particular being assessed somewhat less skeptically. By contrast, the local construction sector remains in deep crisis mode. Only an imminent turnaround in interest rates would breathe new life into it. The continuing downward trend in inflation is giving hope for this. Both headline and core inflation in the euro zone fell more sharply than expected in September. However, at 4.3 and 4.5 percent respectively, both data points are still well above the ECB's target of two percent. In this economically stable environment, particularly in the USA, government bond yields continued to rise. The Fed's "higher for longer" rhetoric also continued to have an impact.
Thanks to their still shorter duration positioning, Moventum portfolios were able to limit losses on the bond side. In contrast to previous weeks, however, spread sectors were unable to escape the rising interest rate environment this time, and investment grade and high yield bonds posted price declines comparable to those of government bonds. Both segments were reduced in favor of government bonds at the turn of the quarter, as we expect corporate bonds versus government bonds to continue to weaken.
On the equity side, only the U.S. equity market performed positively, while European indices and Japan closed negatively. Emerging markets also showed significant underperformance. In the Moventum portfolios, exposure to both Europe and emerging markets was reduced at the beginning of the new quarter, which already had a positive impact on performance. On the other hand, the overweight in Japan proved to be a disadvantage. Despite rising interest rates, the growth segment outperformed the value segment on both sides of the Atlantic.
The Moventum portfolios were also unable to escape the difficult environment of weak equity and bond markets and all reported negative price performance, although this was in line with the market environment. While the bond side in particular (shorter duration) made a positive contribution to relative performance, adverse effects predominated on the equity side, including the overweighting of Japan and the addition of emerging markets.
The PWM portfolio did not achieve a plus in the reporting period, as negative impulses from the bond and commodity side ultimately prevailed. Further, on the equity side, only the US market was able to close on a positive note. Accordingly, all asset classes such as mixed, bond and equity funds suffered. Only the floater funds of DWS and Pareto were able to make a positive contribution and thus escape the negative interest rate and spread environment. In the alternatives segment, the environment of high volatility caused problems. However, the performance of cat bonds was stable as usual. A stronger US dollar and higher interest rates put pressure on the gold price and caused HANSAgold prices to fall.
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