News

The past two weeks have been unspectacular on the economic front. Instead, the US presidential election is increasingly casting its shadow. The markets are trying to identify the sectors and issues that would benefit if one or the other were to win, with the “Trump trade” tending to lead the way. Tax cuts could boost growth and corporate profits, which would also fuel inflation. Interest rate cuts by the Fed would come to an end in such an environment. On the bond markets, this scenario was priced in by rising yields and a stronger US dollar.

The ECB meeting offered few surprises: as expected, interest rates were cut by 25 basis points. The deposit rate fell to 3.25 percent and the main refinancing rate to 3.40 percent. Looking ahead, Christine Lagarde did not commit to an interest rate path. Some market participants expect a reduction of 50 basis points for the December meeting, even though sentiment surveys indicate a certain stabilization of the European (industrial) economy. The Ifo business climate index in Germany, for example, came as a positive surprise, with the situation and expectations components being assessed slightly better.

In the USA, US retail sales increased slightly more than expected in September. The US consumer remains eager to spend and shows no signs of weakness. The prospect of persistently high deficits in the wake of a Trump victory caused yields at the long end of the US yield curve to rise further. Ten-year US Treasuries rose by around 15 basis points to 4.24 percent. Ten-year German Bunds, on the other hand, trended sideways and closed at 2.29 percent, although the yield curve steepened in the wake of the expected interest rate cuts (decline at the short end). In this environment, investment-grade and high-yield corporate bonds outperformed, which benefited the bond side of Moventum portfolios overall.

Global equity markets rose slightly in the past two weeks from the euro investor's perspective. This was mainly thanks to currency gains due to a stronger US dollar. By contrast, European shares fell, as did Japanese stocks, although the losses in Japan were greater. Emerging markets also saw share prices fall after details on the Chinese fiscal package remained scarce. Within Europe, the portfolios were helped by their broad positioning with exposure to the UK and Switzerland. Both markets performed positively. By contrast, investments in second-line stocks did not add any value. These lost out to large caps in the USA and Europe. At sector level, financial stocks benefited from higher interest rates, while the cyclical consumer sector was negatively impacted by the high interest rates. The defensive healthcare sector was not in demand and energy stocks also fell as there was no further escalation in the Middle East. While “growth” stocks clearly outperformed in the USA despite the rise in interest rates, “value” stocks performed better in Europe.

The Moventum portfolios have trended sideways over the past two weeks in line with the market, with hardly any differences in the performance of equity and bond-heavy strategies. However, international investment strategies benefited from currency appreciation against the euro. On the equity side, the exposure to emerging markets proved to be disadvantageous, as did the high weighting in the healthcare sector and the exposure to second-line stocks. However, the positioning at sector level compensated for this favourably. On the bond side, the exposure to corporate bonds proved particularly helpful.

The PWM portfolio performed well in a challenging market environment. In addition to the allocated bond funds, the gold position in Hansagold fund made a significant contribution to this. The performance of the equity and mixed funds was mixed, with positive and negative contributions roughly balancing each other out. Among the alternatives, the Plenum Cat Bond rose again following the slight price losses caused by Hurricane Milton.