Portfolio Manager Update

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

State: 07/05/2026

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: 07/05/2026

Key points at a glance

• Positive monthly performance of 4.38% (YTD: 2.09%)
• 2% bond allocation, average rating of A to A+
• 1 modified duration extended to 11.6 via overlay;
• Gross equity allocation: 43.8%; net equity allocation: 34.9%
• Currency risk: 9.1% (2.5% USD, 1.9% CHF, 4.0% JPY and 0.7% KRW)

The bond portfolio of the Ethna-AKTIV has been adjusted only slightly. The main change involved replacing longer-dated US bonds with euro-denominated securities. The structure of the portfolio has been simplified without sacrificing yield. The portfolio continues to impress with its high quality and long average maturity. Additional derivatives on 30-year German government bonds extend the modified duration from 10.1 to 11.6. With the rise in interest rates over the past two months, we believe that the bulk of the potential loss arising from this high interest rate sensitivity has likely already been absorbed. We believe that even a further rise in inflation expectations will not necessarily lead to higher yields. The resulting dampening effect on growth should act as a natural anti-inflationary measure and could ultimately even lead to lower yields. The vast majority of corporate bonds are denominated in euros, with only around 3.1% in US dollars. In addition to 13% in government bonds from European issuers, there is a cash allocation of 4.5%.

We used the lower share prices to buy technology shares at the start of the month, at attractive valuations. This opportunity arose from the active drawdown management in March. Just as the derivatives overlay was built up rapidly in March, a reduction took place in April. At the end of the month, it consisted mainly of a put option position as a tail hedge and a small futures position, which will also be unwound shortly given our strategically positive stance. Regional diversification via positions in Japan and Switzerland was maintained.

Overall, Ethna-AKTIV is invested 38.1% gross in US dollar-denominated equities and bonds. The unhedged US dollar exposure was further reduced from 11.6% to 2.5%, as we now anticipate a longer-term weakness in the US dollar. The yen exposure resulting from equity purchases stands at 5.5%. Over the course of the month, this was hedged to 4%, as we would like to see a catalyst for a larger position. It remains to be seen whether the Bank of Japan’s intervention at the end of the month will be sufficient for this.

Ethna-DEFENSIV

State: 07/05/2026

Key points at a glance

• Positive monthly performance of approx. +0.63% (YTD: -0.93%)
• Bond allocation virtually unchanged at 96.6%; cash allocation at 3.4%
• Modified duration at 9.7 (base portfolio: 8.8; Buxl overlay contribution: +0.9)
• HY allocation stable at 5.8%; still BB-heavy
• Net US dollar exposure 1.7%; EUR focus at 98.3%

Behind the fund’s stable outward appearance – long-duration, euro-dominated, quality-oriented – a deliberate rotation took place in April: away from the shorter investment-grade core and the long-duration US dollar block, towards euro-denominated mega-cap bonds at the long end. The number of bond positions declined from 102 to 96, while the bond allocation remained virtually unchanged.

In the first half of April, we reduced several medium-term investment-grade holdings in the banking and insurance sectors. The freed-up capital was reallocated to the longer end of the curve, where we see a more attractive risk-return profile. The key move came in the middle of the month with the sale of two long-dated US dollar positions from the energy and utilities sectors. These were replaced by newly issued euro-denominated bonds from global mega-caps with maturities between 2039 and 2046 – predominantly rated in the A to AA range. The logic behind this is clear: we want credit risk in the balance sheets with the highest carrying capacity. If this is possible in the fund’s currency, so much the better.

At the top-position level, the strategic approach remains clearly visible: the EU bonds 2039 and 2040 (4.6% each), the EDF Green Bond 2045 (4.5%), JAB Holdings 2035 (3.9%) and the EnBW Green Bond 2036 (3.8%). The HY segment remains at a conservative level of 5.8%, predominantly BB-rated, with selective exposures to idiosyncratic stories (Crescent Energy, Eutelsat, Nissan).

The Buxl (30-year German government bond futures) overlay – 115 contracts, representing 4.0% of the nominal value – was held unchanged and remains a deliberate lever for our yield thesis. It weighed on performance on days when Bund yields rose, contributed positively during recoveries, and preserves liquidity, as synthetic duration is provided without tying up cash. Should yield levels at the long end of the euro curve rise further, this would not be a reason to reduce the position, but rather to increase it.

Ethna-DYNAMISCH

State: 07/05/2026

Key points at a glance

• Positive monthly performance of 5.06% (YTD: +5.3%)
• Gross equity allocation: 69.3%; no derivatives
• 19.4% bond allocation
• Currency risk (gross): 17.6% (10.1% yen, 6.4% CHF, after hedging -1.5% USD)

The reduction in exposure in March – a targeted risk management measure – proved to be the right decision. This enabled us to acquire specific, interesting positions at attractive prices at the start of the month – in line with our defined themes. In particular, we drastically increased the weighting of Mag7 stocks, which had previously been heavily underweighted, ahead of the earnings season. The extremely positive earnings results have validated that decision. In the course of these transactions, gross exposure increased by approximately 10% to a final level of approximately 70%.

Funds not invested in equities are held in short-term government bonds (19.4%) and cash.

The Ethna-DYNAMISCH is invested 50.9% gross in US dollar-denominated equities. After hedging, the US dollar exposure stands at -1.5%, meaning it is slightly over-hedged. The US dollar allocation was deliberately reduced following the dollar’s recent appreciation, as we anticipate a weaker US dollar in the longer term. Two other notable FX positions are 10.1% in the yen and 6.4% in the Swiss franc. These have been deliberately left unhedged. 

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