Two weeks of low volatility in the markets
The past two weeks were characterized by remarkably low volatility on the markets. Although the reporting season led to temporarily larger swings at individual companies, with positive figures to report from some large technology companies in particular, market participants remained cautious overall.
In the U.S.A., the latest economic data reflect a resilient economy that is gradually weakening at the edges. Real consumption was unchanged in March, while there are signs of a further decline in manufacturing activity. The overheated labor market is also showing the first cautious signs of easing. A tightening of lending standards is on the horizon. The latest data indicate that it has become more difficult for companies to access credit. In the euro zone, the divergence in purchasing managers' indices is intensifying. While the service sector is showing strong expansionary tendencies, the manufacturing sector weakened significantly. The purchasing managers' indices in China indicate that the country's economic recovery is faltering. The manufacturing PMI slipped into contractionary territory in April, reflecting weakness in new orders and export orders. In this environment, equity markets were held up less by market breadth and more by some highly capitalized companies. Renewed concerns about the banking sector and the U.S. debt ceiling, which could be reached as early as June, allowed government bonds to benefit as safe havens. In return, bond investors had to accept increased risk premiums on corporate bonds. The bond side of Moventum's portfolios was only able to participate to a limited extent in falling interest rates for longer maturities due to their short duration positioning. However, short-dated bonds contributed to lower volatility. Bonds from the corporate sector showed slightly higher risk premiums in some cases and were unable to keep pace with safe government bonds. On the equity side, beneath the surface a shift in favorites toward defensive sectors showed that investors have become more cautious. As interest rates fell, the growth segment benefited, outperforming the value segment by 0.9 percentage points. In an environment of weakening economic data, the cautious positioning in the small cap segment proved to be correct. The weak performance of emerging markets, in which the Moventum portfolios are neutrally weighted, was conspicuous. The overweight in Europe did not pay off, but the slight overweight in the technology sector and the accentuation of industrials contributed positively. The overweight healthcare sector failed to add value over the period. In this environment, Moventum portfolios underperformed the market due to their positioning on the fixed income side and posted negative performance. Overall, the exposure on the equity side was only able to make an insignificant contribution to the overall result. The PWM portfolio was unable to fully escape the increased risk premiums on the bond side and closed slightly negative. Positive contributions were made by the short-dated bond products with their attractive carry yield, as well as the two long/short equity funds and other alternative investment strategies such as the options strategy and CAT bonds, which brought the desired diversification to the portfolio. Overall, the mixed fund strategies remained inconspicuous. The main negative factors were the exposure to convertible bonds, which react sensitively to widening spreads, as well as the investment in the European value equity fund and the positioning in precious metals, after gold in particular consolidated this time following the very encouraging performance in previous weeks.
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