Upswing from rising equity markets and falling bond yields
After the Chairman of the US Federal Reserve clearly signaled to the markets that interest rate cuts were to be expected soon, the stock and bond markets were unstoppable and rose significantly. New all-time highs were reached everywhere, including the Dax and the US S&P 500, but the Indian and Swiss stock markets also recorded new record highs. The party mood on the stock markets could not be dampened by ECB Chairwoman Lagarde, who sounded "hawkish" following the ECB's interest rate decision: the topic of interest rate cuts had not even been discussed in the Council. Nevertheless, the markets are convinced that the ECB will quickly follow as soon as the Fed has started to cut interest rates.
The soft landing scenario is being supported by globally declining inflation rates. At 3.1%, the annual rate of US inflation is in line with expectations. The US labor market also remains stable and there are no signs of an imminent recession. In Germany, meanwhile, the ZEW index for economic expectations rose surprisingly strongly. Here, market participants' hopes of interest rate cuts in the near future outweighed the gloomy current economic situation. This was reflected, for example, in weaker than expected purchasing managers' indices for the services and manufacturing sectors. The bond markets recorded significant price gains in the course of falling interest rates. For example, the ten-year US government bond is back below 4%, whereas it was still above the 5% mark in October. The Fed's new "dot plot" sees a median interest rate cut of 75 bp for 2024. However, the markets are already pricing in six interest rate cuts for 2024.
In this environment, government bonds performed best. The credit segments also made significant gains, but lagged somewhat behind the performance of government bonds due to their shorter duration. The bond side of the Moventum portfolios was able to participate very well in this development. On the equity side, all major stock markets once again performed positively, led by European and US stocks. Growth was lowest in Japan, where the Moventum portfolios are overweighted, and in the emerging markets, where the Chinese equity market in particular showed weakness and performed negatively.
At style level, value stocks outperformed growth stocks in the USA, while growth outperformed in Europe. The Moventum portfolios are broadly positioned in terms of style and were able to participate accordingly. The overweighted healthcare sector underperformed the MSCI World. However, this was more than compensated for by the outperformance of the overweight technology sector. The favorable environment for equities and bonds led to price gains in all strategies in the Moventum portfolios over the past two weeks.
On the bond side, it was not possible to fully participate in the rapid decline in yield levels, as the exposure to reduce volatility continues to include money market-related strategies. On the equity side, the overweighting of Japan created a slight headwind. Some funds with a more defensive positioning were also not quite able to keep up with the market rally.
In the reporting period (04.12.2023-15.12.2023), the PWM portfolio showed a sustained positive performance over the past two weeks, which was broadly supported by corresponding performance contributions from all portfolio components. The market environment benefited bond and equity funds in particular, all of which performed well. Among bond funds, the FvS Bond Opportunities, which benefited from its duration of about eight years, was particularly convincing. Among equity funds, Comgest Growth Europe came out on top, benefiting from the outperformance of growth stocks. Tailwinds from rising equity markets and falling bond yields also ensured decent price gains for most mixed funds. Only the uncorrelated Nordea Alpha 10 MA had problems with this one-sided market environment. Among the alternatives, the two vola strategies suffered slight setbacks. The gold price has been volatile over the past two weeks, with HANSAgold posting a small loss overall.
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