Portfolio Manager Update

To the latest Market Commentary

Macro and markets at a glance

State: 05/11/2026

Here’s what you should keep an eye on this month

• Real global economic growth is expected to exceed 3% in 2027.
• Geopolitical tensions, already tighter financing conditions and high public debt are weighing on growth.
• Inflationary pressure persists. Base effects, AI-driven efficiency gains and the absence of wage pressure could provide relief, even if energy prices remain unchanged.

The global economy remains on a stable growth path, but risks are mounting. At present, the technology and AI investment cycle, together with government spending, is supporting economic activity. Persistently elevated energy prices, political uncertainty and increasingly restrictive financing conditions are weighing on growth.

The US economy remains robust. GDP grew at an annualised rate of 3.4% in the third quarter. For the fourth quarter, the Atlanta Fed’s GDPNow estimate continues to signal strong momentum of more than 3%. Private consumption, investment in AI infrastructure and a comparatively favourable energy supply remain key drivers of growth. Consumer confidence rose surprisingly sharply in October from a decade low. The unemployment rate climbed to 4.2%.

The picture in the eurozone is increasingly fragile. Following surprisingly strong GDP growth of 0.6% in the second quarter, signs of a slowdown are multiplying. The composite purchasing managers’ index fell from 53.1 to 51.9 points in October. The economy is therefore still expanding, albeit at a slower pace. France in particular is suffering from political uncertainty, social tensions and rising financing costs. Amid the current budget debate, French government bond yields have risen to levels last seen in 2002. Risk premia within Europe are also widening.

There is as yet no measurable easing of inflation. In the eurozone, the inflation rate rose to 3.8% in September, up from 3.2% in August. The main driver was the energy component, with prices up 18.8% year on year. Core inflation, by contrast, rose only moderately to 2.5%. The corresponding figures for the US are 3.7% and 2.5%.

The latest business surveys point to rising input costs, while pass-through to end customers has so far remained limited – further evidence of a supply-side price shock. As a result, both the Fed and the ECB increasingly face a trade-off between fighting inflation and the risk of placing an excessive burden on the economy through further tightening. The risk of further US-Israeli strikes on Iran and of retaliatory attacks on Saudi infrastructure is putting additional pressure on energy prices.

Both central banks left their policy rates unchanged at their end-of-month meetings, and both the Fed and the ECB signalled that further rate rises may lie ahead. Given the robust US economy and its dual mandate, which covers employment as well as price stability, the Fed has a certain amount of room for manoeuvre. The ECB, by contrast, is committed solely to price stability. This increases the pressure on it to respond to an energy price shock that monetary policy can do little to influence. We continue to take a critical view of this stance. In our view, a further rate hike would be counterproductive. As long as the energy price shock does not become firmly entrenched in wages and core inflation, the ECB runs the risk of cooling the economy unnecessarily.

Key conclusions:

Over the coming months, the interplay between energy prices, inflation, monetary policy and rising financing costs will remain the key market driver. Real global growth is expected to exceed 3% in 2027. The crucial question is whether the energy price shock feeds through into wages and core inflation. If second-round effects fail to materialise, the rise in inflation will prove temporary.

Asset classes

Bonds / Yields

After the sharp rise in yields in the previous month, interest rates have recently eased somewhat. The yield on ten-year US Treasuries is once again around 5%. The Fed and the ECB left their policy rates unchanged. At the same time, pressure at the long end remains high: alongside doubts about the profitability of AI investment, capital scarcity is increasingly coming into focus. Governments with large financing needs, hyperscalers with enormous investment plans and upcoming mega-IPOs are competing for investors’ limited funds. This is raising the yields investors demand and sharpening differentiation between issuers. The effect is most visible in Europe: the spread of French over German government bonds temporarily widened to 174 basis points. Despite the subsequent easing, pressure on France remains high. Corporate bonds are also under pressure, with European credit spreads widening more than US spreads – particularly in the euro high-yield segment, where spreads rose by 60 basis points while US spreads were unchanged.

Summary/Outlook

We continue to regard the move in interest rates as overdone and see the renewed rise in yields as offering attractive entry points. Increasing competition for capital and doubts about the profitability of AI investment could cause further volatility. The widening of spreads in Europe is leading to greater differentiation: while higher yields on high-quality issuers present opportunities, we remain cautious on weaker borrowers. We continue to favour strong credit quality and longer maturities, and remain prepared for the possibility that the current repricing is not yet complete.

Equities

The rotation beneath the surface continues and has once again reversed the previous month’s move. Whereas the equal-weighted S&P 500 had recently lagged the market-cap-weighted index, last month it was the heavyweights that came under pressure again. At the same time, the market is becoming more selective. After two outstanding reporting seasons, high expectations have become the benchmark, and companies that fail to meet them are in some cases heavily punished. Attention is increasingly turning to whether the vast AI investments will continue and whether they will be profitable. What matters is no longer just how much capital flows into data centres and chips, but what returns it generates.

Summary/Outlook

We are maintaining our tactical and strategic overweight in equities. Earnings growth and corporate guidance remain supportive, even though high expectations and the concentration on a small number of market leaders increase the potential for setbacks. The US midterm elections could also provide a tailwind: since 1950, the S&P 500 has posted gains in the six and twelve months following every midterm election. This remarkable historical pattern is, however, no guarantee of future performance. What will ultimately matter are earnings growth and evidence that the heavy AI investment is actually paying off.

Currencies

The US dollar gained a further 1.5% against the euro in October. In our view, the dollar was driven by two forces. The first is the lingering effect of the hawkish interpretation of the Fed’s September meeting. The second is the still unresolved conflict in the Middle East, which is highlighting the dollar’s role as the global trading and petrodollar currency. At the same time, the US administration’s policy of a weaker dollar, and the greater competitiveness of the US economy this is intended to bring, remains a structural headwind.

Summary/Outlook

We do not expect the Fed to turn significantly more hawkish on a lasting basis, and therefore do not anticipate a sustained widening of the interest rate differential. We see the recent dollar strength mainly as a countertrend move and a reflection of increased safe-haven demand. Accordingly, we remain cautious on the US dollar and continue to keep our currency exposure largely hedged.

Ethna-AKTIV

State: 05/11/2026

Key points at a glance

• Negative monthly performance of -0.85% (YTD: 2.80%)
• Bond allocation unchanged at 40.9% (average rating between BBB+ and A-);
• Modified duration: 9.4 (10 including overlay)
• Gross equity allocation increased from 41.9% to 44.6%
• 7% currency risk (1.8% USD, 4.6% JPY, 0.3% CHF)

Fixed income: positive contribution from flight to safety

The bond portfolio made a positive performance contribution of 0.64% in October. This was driven by increased risk aversion in the equity markets, which triggered a flight to safety and benefited the bond markets.

Against this backdrop, no further adjustments were necessary. The main portfolio changes had already been made in September. Modified duration remains at 9.4. Through the targeted use of a small derivatives position on US Treasuries, duration at portfolio level was raised slightly to around 10.

There was also no change in credit quality. The average rating remains between BBB+ and A-. The average yield to maturity (YTM) is unchanged at around 5%. The share of bonds in the overall portfolio also remained constant. Currency risk remains limited: only 2.6% of the portfolio is denominated in US dollars.

By rating, 3.8% of the portfolio is invested in AA-rated bonds, 17.3% in A-rated bonds and 19.8% in BBB-rated bonds. The portfolio thus remains positioned in the investment-grade segment, as before.

Equities: market rotation weighs on the portfolio

Equity markets were characterised by a pronounced rotation. In particular, the correction in the market heavyweights weighed on portfolio performance, as we remain overweight in these stocks. The headwinds for hyperscalers and AI beneficiaries arose during the current reporting season: even very strong results were often not enough to meet high expectations.

Notwithstanding these short-term headwinds, we remain fundamentally positive on equities and are maintaining our overweight in US equities. Given the continued attractive prospects, we are sticking to our fundamental positioning, and even the recent market rotation does not change this. Nevertheless, we made some minor reallocations into more defensive stocks in the pharmaceutical and healthcare sectors.

The number of individual holdings was increased to 35. The expected price/earnings ratio (P/E) of the equity portfolio currently stands at 16.3.

Currencies: US dollar strength only temporary

Our fundamentally negative view of the US dollar is unchanged. We regard the recent strength of the US currency as merely a temporary countertrend move and continue to see structural headwinds. Accordingly, we are maintaining our cautious positioning. Currency risk after hedging currently amounts to 6.7% and comprises 1.8% USD, 4.6% JPY and 0.3% CHF. 

Ethna-DYNAMISCH

State: 05/11/2026

Key points at a glance

• Negative monthly performance of -3.10% (YTD: 1.98%)
• Gross equity allocation increased from 81.4% to 91%; no derivatives
• 7% bond allocation (short-dated AAA bonds); 4.4% cash ratio
• 1% currency risk (2.9% CHF, 7.0% JPY, -1.4% USD, 0.5% CAD)

Equities: portfolio adjustments for greater stability

The Ethna-DYNAMISCH recorded a negative monthly performance of 3.1% in October. The pronounced market rotation weighed particularly heavily on the portfolio. Owing to our continued high AI exposure, we were disproportionately affected by the correction in this segment. At the same time, the portfolio lacked a sufficient counterweight to these headwinds. Overall, we a made only minor changes to the gross equity allocation, while making targeted adjustments to the composition of the equity portfolio. Our aim is to increase the portfolio’s stability and balance without sacrificing existing growth opportunities. The number of individual holdings was increased by two to 54. The expected price/earnings ratio (P/E) fell from 21.2 to 18.7 as a result of the market correction and the adjustments made.

The bond allocation currently stands at 5.7% and the cash ratio at 4.4%.

Currencies: Minimal exposure 

On a gross basis, US dollar-denominated equities account for 70.7% of the portfolio (previous month: 71.7%). We remain firmly of the view that the US dollar is structurally weak. After currency hedging, USD exposure is even slightly negative at -1.4%. The additional positions in JPY (7.0%), CHF (2.9%) and CAD (0.5%) remain marginal and have no material impact on the fund’s currency risk.

Ethna-DEFENSIV

State: 05/11/2026

Key points at a glance

• Positive monthly performance of +1.00% (YTD: −3.02%) – first positive month since June
• Bond allocation raised slightly to 80.7% (previous month: 78.9%); cash ratio still deliberately high at around 19%
• Modified duration of around 8.3; no derivatives overlay
• Government bond allocation unchanged at 1.3%; high-yield allocation broadly stable at 3.6% (previous month: 3.8%)

Sovereign risk avoided, liquidity held as an option

In October, the source of volatility was the credit risk of individual sovereigns rather than that of companies – a risk we had largely removed from the portfolio with the restructuring in September. Following the sale of the supranational block, government bonds now account for just 1.3% of the portfolio, spread across two positions (Indonesia 2038, IBRD 2061). The fund was therefore barely affected directly by the widening of government bond spreads. The core of the portfolio consists of 76 investment-grade corporate bonds, which together account for 75.5% of fund assets. The largest positions remained unchanged: EnBW 2036, Volkswagen 2035, OMV 2040, Vonovia 2040 and EDF 2045, each at around 4%.
We currently consider financially sound issuers with predictable cash flows to be more reliable borrowers than some highly indebted governments whose budgets depend on shifting parliamentary majorities.

We deliberately refrained from investing our available liquidity into the recovery. Towards the end of the month, we merely added two positions at the short and medium end of the maturity spectrum: Edenred 2034 (A−) and Raiffeisenlandesbank Niederösterreich-Wien 2030 (A), each at around 0.4%. The high-yield segment remained virtually unchanged at 13 positions, mostly in the BB range. Our restraint reflects a weighing of risks and is not a rejection of the asset class: with eurozone inflation most recently at 3.8% and a further rate hike expected in December, the risk of another rise in yields at the long end has not been eliminated. At the same time, the cost of waiting is manageable. Holding cash means forgoing just over 2.5 percentage points relative to the bond portfolio’s yield of around 5%. That is the premium we pay for the option to buy more at higher yields.

The focus is now on the ECB’s December meeting and its new projections, on whether energy-driven price pressure spills over into core inflation, and on the progress of France’s budget deliberations. A renewed rise in yields towards the September highs or a marked widening of corporate bond spreads would prompt us to deploy our liquidity gradually at the long end of the curve. Until then, the fund remains what it has been since the restructuring: a quality-focused corporate bond portfolio with a reserve that provides room for manoeuvre.

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