Cognitive dissonance – this is a term used by behavioural economics to describe the internal conflict that investors experience when trying to reconcile two contradictory beliefs. For example, the valuations of many technology stocks are currently ambitious, while at the same time the long-term profit prospects for AI-focused companies remain extremely high. Similar dissonances are also visible in the American economy: persistently high inflation and a strong labour market are forcing the Fed to delay the interest rate cut long-awaited by the markets. In addition, the weak economic forecast for the USA and falling consumer confidence indicate that interest rate cuts would be appropriate soon. In this difficult situation, the Fed's position is not to be envied, as it finds itself between two chairs. How are investors reacting? They practice cherry-picking: rationalizing decisions by focusing on information that supports the original decision while ignoring contradictory facts. However, the cognitive dissonance does not disappear, it just becomes more bearable. A saying by the popular comedian Karl Valentin fits the current situation of central banks and investors: "I would have wanted to, but I didn't dare."
Under these circumstances, the European market (MSCI Europe) suffered moderate losses of -1.5% in August, followed by Japan (MSCI Japan) with -1.1%. The USA (MSCI USA) experienced significant discounts at -4.2%. Only China (MSCI China) was able to decouple from the global market trend and recorded a gain of +6.4%. (All price indices in local currency). According to Bloomberg indices, better quality US corporate bonds posted losses of -2.5%, as did their European counterparts of -0.9%.
The stock portfolio suffered losses in April (Fig. 1). Profit-taking in companies such as Kinsale and Meta, as well as weakness in dynamic companies such as Upstart and Dutch Bros, contributed to the development. The result was mitigated, among other things, by gains in tech stocks such as Alphabet, Alibaba, and Baidu as well as financial service providers such as Lemonade and PayPal. ASML shares were added to the portfolio again, while Zoetis and Zscaler shares were sold. The position in Meta was reduced due to profit taking. The bond portfolio also recorded a decline, with interest-sensitive securities such as long-term government bonds in particular suffering from the uncertainty surrounding future central bank policy. Only bonds with a short remaining term or higher risk premiums were able to gain. A buyback offer from Techem was accepted and a long-term French government bond was purchased.
We are currently maintaining an overweight in interest-bearing sources, with an overall considered portfolio orientation. This reflects current valuation levels and uncertainties.
| Fig. 1 Mo-end return as of April 2024 |
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|---|---|
| 1-mo | -1.81% |
| 3-mo | +1.23% |
| 6-mo | +10.92% |
| YTD | +3.47% |
| 1-yr | +9.15% |
| Since launch (10/18/2021) | -2.27% |
| Rolling 12-mo | |
| On the day of launch (upfront fee) | 0.00% |
| 04/30/2023 - 04/30/2024 | +9.15% |
| 04/30/2022 - 04/30/2023 | -4.19% |
| Source: CleverSoft, 04/30/2024. Due to the longest history and largest volume, we show the data for share class D here (other share classes). The information is historical data and does not represent an indicator of future developments. The management and custodian bank fees as well as all other costs charged to the fund are included in the calculation. |
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