Portfolio Manager Update

Geopolitical Headwinds Meet AI Investment Boom – Global Economy Caught in the Crossfire

State: 06/05/2026

The oil price shock resulting from the Middle East conflict continued to dominate the markets in April. This is causing inflation expectations to rise once again and is having a significant impact on macroeconomic developments. The IMF has lowered its global growth forecast for 2026 to 3.1% and raised its global inflation projection to 4.4%.
The ECB and the Fed never tire of emphasising that the risk landscape has clearly shifted: downwards for growth, upwards for inflation – particularly in the event of a prolonged or geographically expanded escalation. This is particularly relevant for Europe, as higher import prices, weaker real incomes and a more cautious business sentiment are weighing on the already fragile industrial economy.

The economic situation in the US is extremely robust and, above all, still very resilient to geopolitical upheavals. Surprisingly, the strong recovery in leading indicators observed in recent months was not revised downwards. The consumer price index jumped to 3.3% year-on-year, driven primarily by energy. The change in the core index was significantly more moderate at 2.6%.

The US labour market has recently remained in a “no hire, no fire” mode: companies have hardly been hiring but have also laid off very few employees. As a result, the unemployment rate remained at 4.3%. This is precisely where the Fed’s dilemma lies. The labour market is too robust for rapid interest rate cuts, but not dynamic enough to serve as a reliable buffer in the event of an economic downturn. As long as inflationary pressure from energy prices persists, the central bank will find it difficult to ease policy pre-emptively without jeopardising its credibility regarding the inflation target.

In the eurozone, the tension between inflation and growth has recently intensified. According to Eurostat, inflation even rose to 3.0% in the flash estimate for April, mainly due to higher energy prices. At the same time, growth remained weak: initial reports pointed to only a very moderate increase for the first quarter, whilst the impact of the energy shock was already making itself felt in sentiment and demand. The labour market, by contrast, has so far proved surprisingly resilient. The unemployment rate fell to 6.2% in March, remaining close to its low, which is initially supporting private consumption and preventing an abrupt slowdown. However, weak leading indicators signalled a downturn. The significant rise in uncertainty suggests that real economic activity will remain under pressure in the second quarter. The ECB emphasised that it would only assess, on the basis of forthcoming data, whether the energy-driven surge in inflation remains temporary or becomes more entrenched.

Despite these headwinds, our positive growth outlook remains underpinned not only by fiscal support and productivity gains from AI, but also by continued high levels of capital expenditure. The hyperscalers have once again significantly increased their plans in this regard for 2026. At the same time, high order books indicate that demand for cloud and AI infrastructure remains very robust. The sheer scale of this investment wave suggests that the expansion of data centres and network infrastructure can continue to underpin global industrial activity and supply chains. For us, this is a key argument, as this cycle not only generates short-term demand but also increases productivity potential in the medium to long term.

Rising Real Rates Put Markets Under Pressure

Interestingly, the risk markets turned around right at the start of the month. What initially looked like a bounce following a sell-off quickly developed into a one-month risk-on rally, which ultimately almost wiped out the previous month’s losses, or even turned them into gains. This shift in sentiment can be attributed to the ceasefire in the Middle East and, even more so, to the very convincing earnings season.

Bonds / Yields

The trend reversal described above was also evident in the bond segment. However, this applies only to spreads against government bonds, which are now trading at the lows seen before the Iran war. Owing to persistent inflation concerns, there was no relief on the interest rate front. The yield on 10-year US government bonds rose slightly from 4.32% to 4.37%. Given current inflation expectations, the market currently does not anticipate any interest rate hikes by the Fed in 2026. Even though the starting point – with a stable labour market and significant inflation risks – appears complicated for the new Fed Chair, we continue to expect the Fed to pursue an easing stance, contrary to the consensus. In the investment-grade segment, spreads narrowed from 89 to 82 basis points. Risk premiums in the high-yield sector fell from 317 to 268 basis points.

The yield on 10-year German government bonds also remained at an elevated level. It rose slightly from 3.00% to 3.04%. The market continues to price in three interest rate cuts by the ECB. Should the central bank be tempted to do so on the basis of its mandate, which is solely focused on price stability, we believe this would be a clear policy error. Risk premiums on corporate bonds fell in tandem with their US counterparts to near all-time lows. EUR-IG spreads fell from 98 to 82 basis points. EUR high-yield spreads fell from 332 to 282 basis points.

Summary

The defensive, quality-oriented focus is a key reason why we see no fundamental need for adjustment. Whilst the long duration of our bonds is leading to temporary market value losses in the current interest rate environment, we continue to expect to see yields at the long end remaining stable or declining on both sides of the Atlantic. In our view, short-term inflation concerns are overstated; they are of only limited relevance to long-term yield trends, so we believe the recent rise in the market represents more of a short-term overreaction. Against this backdrop, we are using the narrowing yield spread to reallocate further US bonds in favour of high-quality European issues.

Equities

The earnings season was very strong overall and confirmed the continuing dominant role of major platform and semiconductor stocks, particularly in the US technology sector. Results were well above expectations: buoyed by large-cap technology stocks, the S&P 500 has now achieved earnings growth of almost 30% for the first quarter, with revenue growth of over 10%. The corresponding figures for the Stoxx 600 stand at around 11% and 1%. Alongside the greater dependence on the Strait of Hormuz, it is precisely this discrepancy that explains why US indices hit new highs as early as April, whilst their European counterparts have so far been unable to regain this level. Interestingly, this jump in earnings also led to lower valuation multiples despite higher index levels. Within the market, semiconductors and energy remained key drivers, albeit for different reasons. Semiconductor stocks continued to benefit from robust AI demand and the investment programmes of major cloud providers, whilst the energy sector profited from geopolitically driven oil price movements.

Our core thesis of higher productivity through AI, sustained fiscal stimulus and selective growth therefore remains intact. However, the future earnings trajectory and the resulting share price performance depend heavily on the timeline of the Iran conflict and the resulting supply bottlenecks.

Summary

The past two months demonstrate that active risk management not only protects against losses but also enables opportunities to be seized in times of crisis. Whilst we only gradually reduced our tactical hedges during the course of the month, we were able to add both previously sold and new attractive stocks to the portfolio at attractive prices ahead of the earnings season. Strategically, our outlook remains positive. Tactically, the remaining hedge was significantly reduced and switched from futures to options.

Currencies

As the Middle East conflict continues to de-escalate, the US dollar is also losing its appeal as a safe-haven currency. At the end of the month, it stood at 1.173 against the euro, only slightly stronger than before the outbreak of war. Against the backdrop of a likely narrowing interest rate differential with the eurozone, we expect the US dollar to weaken further. Contrary to our thesis, the yen was unable to recover from its lows. It was only the intervention of the Bank of Japan that fully offset the monthly losses.

Summary

As planned, we used the strength of the US dollar to further reduce the allocation. Currently, after currency hedging, we have only minimal exposure. The yen and the Swiss franc contribute to the further diversification of our currency position. The yen position has been reduced. Even though we expect enormous upside potential, we would first like to wait for the momentum of the movement to build before potentially increasing the position again.

Ethna-AKTIV

State: 02/06/2026

Key points at a glance

• Positive monthly performance of 4.45% (YtD: 6.62%)
• Bond allocation: 51%; Ø rating of A to A+
• Duration: 11.5 (core portfolio 10.1; overlay contribution: +1.4)
• Gross equity allocation: 30.3%; net equity allocation: 29.9%
• Currency risk: 7.2% (2.5% USD, 2.7% JPY, 1.7% KRW and 0.3% CHF)

Bonds: Focus on quality and long maturities

Only minor adjustments were made to the bond portfolio of the Ethna-AKTIV. In total, the 53 titles represent high quality and a long average maturity. We further express our conviction that interest rates may fall through derivatives on 30-year German government bonds, which extend the modified duration from 10.1 to 11.5. The majority of corporate bonds are denominated in euros, with only around 3.1% in US dollars. In addition to 12.8% in government bonds from European issuers, there is a cash allocation of 17.9%.

Equities: profits realised, flexibility increased

The fund’s current cash holdings are so high because, following the successful increase in the equity allocation at the start of the month, this move was more than reversed towards the end of the month. From a peak of over 44%, the allocation was reduced to 30.3% through sales of individual shares. Although the excellent earnings season and the associated outlook support our positive strategic view, we would like to adopt a somewhat more cautious approach in the coming weeks and months. Following the profit-taking, we can now use developments in the Iran conflict, the SpaceX IPO and the highly likely mid-term election volatility to evaluate new opportunities. The portfolio is currently relatively concentrated, comprising just 19 stocks.

Currencies: Yen exposure halved

Overall, the Ethna-AKTIV is invested 25.8% gross in US dollar-denominated equities and bonds. After hedging, the US dollar exposure stands at 2.5%, as we anticipate a longer-term weakening of the US dollar. Yen exposure has been reduced from 5.5% to 2.7%. Even the Bank of Japan’s intervention has so far failed to trigger a sustained price reaction. Until this occurs, we will remain cautious.

Ethna-DEFENSIV

State: 02/06/2026

Key points at a glance

• Positive monthly performance of 1.77% (YtD: 0.83%) in a month characterised by stabilising German government bond yields and credit tightening.
• Bond allocation virtually unchanged at 96.9%; cash allocation at 3.1%
• Modified duration: 9.8 (core portfolio 9.0; Buxl overlay contribution: +0.8)
• High-Yield allocation stable at 5.9%; low trading volume with two selective adjustments

Market: Easing at the long end of the EUR curve

The fund’s basic structure – quality-oriented, long-term, EUR-dominated – remained unchanged in May. The Buxl overlay (115 contracts, corresponding to +4.86% of the nominal value) maintains the synthetic duration at 9.83 and contributed positively to performance in May, as the long end of the EUR curve normalised following the tensions in April.

Strategy and portfolio: Consistency in quality and focus

The bond allocation rose slightly to 96.9%, spread across 98 positions. Trading volume remained low, with only minor adjustments overall and no strategic implications. The portfolio remains clearly focused on long-dated, EUR-denominated investment-grade (IG) bonds through its top holdings – in particular the EU bonds 2040 and 2039, the EDF Green Bond 2045, as well as JAB Holdings 2035 and EnBW 2036. The average rating remains solid in the A range; AAA-rated bonds account for 17.6% (up from 17.3% the previous month), whilst the BBB segment (BBB+ to BBB−) accounts for around 33%.

The High-Yield (HY) segment remained stable at 5.9% and is predominantly positioned in the BB range, reflecting the defensive-conservative orientation. There are currently no plans to increase the HY allocation.

Currency risk remains minimal, with a net dollar exposure of 1.7%; the portfolio remains over 98% euro-focused. The USD position is unhedged and serves as an opportunistic addition, without having a material impact. There are no plans to increase foreign currency exposure.

Liquidity remains at a low level of 3.6%, consistent with the mandate being almost fully invested. The Buxl overlay provides synthetic duration without tying up liquidity, thereby maintaining flexibility for opportunistic purchases – particularly relevant given the ongoing uncertainty surrounding Iran and the Strait of Hormuz, and the expected ECB rate hike decisions in June and September, which could trigger short-term volatility in both directions.

Ethna-DYNAMISCH

State: 02/06/2026

Key points at a glance

• Positive monthly performance of 5.73% (YtD: 11.33%)
• Gross equity allocation: 59.1%; no derivatives
• Bond allocation: 21.5%
• Currency risk: 7.7% (2.6% JPY, 2.8% CHF, 1.5% USD after hedging)

Equities: selectively concentrated, tactically flexible

The fund’s thematic approach continued to prove successful in May. In addition to targeted selection adjustments, the fund’s allocation was also dynamically adjusted. An increase in the allocation of more than 10% at the very start of the month was followed by a reduction of approximately 20% at the end of the month. As part of this reduction, we mainly divested high-beta stocks, which are now very highly valued. Following the profit-taking, we can now use developments in the Iran conflict, the SpaceX IPO and the highly likely mid-term election volatility to evaluate new opportunities. The portfolio is currently invested in 36 stocks, with six of the Magnificent 7 stocks accounting for 14.6% of the weighting alone.

Funds not invested in equities are held in short-term government bonds (21.5%) and cash.

Currencies: USD hedged, foreign currencies reduced

The Ethna-DYNAMISCH is invested 53.1% gross in US dollar-denominated equities. After hedging, the US dollar exposure stands at 1.6%, as we anticipate a longer-term weakening of the US dollar. Two other notable FX positions are 2.6% JPY and 2.8% CHF. Both positions have been reduced over the course of the month. 

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