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Weakening US economic data - Cyclical recovery in Europe

Weakening US economic and labor market data and a less hawkish-sounding US Federal Reserve gave market participants renewed hope of interest rate cuts. Together with solid quarterly figures from major US tech companies, this led to rising stock markets and price gains on the bond markets. Meanwhile, a cyclical recovery appears to be underway in Europe, which is likely to be supported by interest rate cuts. In Germany, the much-noticed Ifo business climate index rose more strongly than expected, with the expectations component and the assessment of the current situation improving.

The GDP figures for the first quarter in the eurozone also came as a positive surprise. In contrast, GDP data in the USA was weaker than expected. Developments on the labor market also fell well short of expectations in April, after the data in previous months had mostly surprised on the upside. And last but not least, the ISM Purchasing Managers' Index for US industry fell below the expansion threshold of 50 points again. Although, as expected, the Fed did not make any changes to interest rates, it did slow down its quantitative tightening more than expected, meaning that it will actively sell fewer bonds in future than at present in order to reduce its balance sheet. Together with the weaker labour market data, this pushed the yield on the 10-year US government bond back towards 4.50 percent. The Bund yield, on the other hand, was less volatile and remained at 2.50% at the end of the period under review. The credit segments also recorded growth in the more favorable market environment. Investment-grade bonds grew in line with government bonds and high-yield bonds somewhat more strongly. The Moventum portfolios were able to participate well in the market trend. Thanks to globally allocating bond funds, it was possible to benefit from the disproportionate fall in interest rates in the USA.

Price gains on the equity markets were broadly diversified across regions and were led by our overweighting in Japanese equities. Interventions by the Japanese central bank halted the sell-off in the Japanese yen and, from the euro investor's perspective, ensured currency gains in addition to the equity gains. In the USA, our prominently weighted growth stocks in particular posted above-average gains, while our underweighted European equity market recorded the lowest growth. The emerging markets also made significant gains, driven by a short-term rebound in China. By contrast, investors did not focus on the smaller emerging markets included in our analysis. While growth stocks clearly outperformed in the USA, as mentioned above, value stocks were ahead in Europe. On the sector side, the market was driven by tech stocks, which have a sufficiently high weighting in the Moventum portfolios. However, the slightly overweighted defensive healthcare sector was less sought after. The positive performance on the equity and bond markets over the past two weeks also benefited the Moventum portfolios, which all recorded gains. While the development on the bond side was favorable overall, the equity side suffered from the underperformance of "growth" in Europe and the low market breadth in the USA, as the gains there were heavily concentrated on the tech mega caps and defensive sectors were not in focus.

The PWM portfolio performed slightly positively in the past two weeks, but was only able to participate to a below-average extent in the performance of the equity and bond markets. All bond and mixed funds performed positively to some extent. Among the alternatives, the Aquantum Active Range hedging strategy gave back some of the gains it had made. On the other hand, the 7orca Vega Return made gains. The results for the equity funds were mixed. Morgan Stanley Global Brands suffered from the weak performance of defensive sectors and Comgest Growth Europe from the underperformance of "Growth" in Europe. The GQG funds made more significant gains. HANSAgold was unable to escape the correction in the gold price.

Performance overview.


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