General Market Review
Global stock markets dropped again during the month of October as bond yields rose sharply in the US and heightened geopolitical uncertainty weighed on the market. In the US inflation rates came in higher than expected with headline inflation and core inflation rates at 3.7% and 4.1% year-on-year for the month of September.
A strong job market adding 336k non-farm payrolls gave further evidence of the resilience of the US economy. The US central bank (FED) may need to hold interest rates higher for longer. At the same time, concerns around the sustainability of government finance led to a sell-off in longer-term US treasuries.
In Europe weakened GDP growth of +0.1% year-on-year and diminishing consumer confidence weighed on stock markets. The European Central Bank maintained its deposit facility and the main refinancing rate at 4.0% and 4.5% respectively. Euro-area headline inflation increased by only 2.9% year on year and thereby the lowest level in two years.
In this environment, The MSCI World Index fell by -2.9% and the MSCI Europe Index by -3.6%
Energy and Transportation
The price of Brent oil fell from a high of $ 95.3 to $ 87.4 per barrel as production growth from countries outside OPEC+ has increased. Despite the ongoing production cuts of Saudi Arabia and Russia global crude inventories have increased during the month of October. As a result, the STOXX 600 Oil and Gas Index fell by -1.1 % in October.
In the renewable energy segment, stocks sold off sharply. The S&P Global Clean Energy Index lost -11.3% during the month as higher interest rates took a toll on the sector.
Transportation segments recorded a mixed performance. The Dow Jones Transportation Index fell by -7.2% and the US Global Jets Index fell by -12.5%. On the other hand, the Russell 2000 Marine Transportation Index increased by +3.25%.
The dry bulk segment has shown weakness throughout the month. Capesize rates fell from $ 20k per day to $ 17k at the end of the month. In the container freight market, the SCFI (Shanghai Containerized Freight Index) increased by +10% compared to the previous month. The SCFI index is still down -36% year-on-year. Crude oil tanker (VLCC – Very Large Crude Carrier) rates increased from $ 24k/day to $ 54k/ day at the end of the month, whereas product tanker rates fell. VLGC (Very Large Gas Carrier) rates have remained at ultra-high levels of around $120k/day at month-end.
In the aviation segment, US airlines have reported their quarterly earnings. Southwest Airlines reported a fall in quarterly profit due to soaring fuel and labor costs.
Delta Airlines is expecting an ongoing travel book extending into the end of the but also cautioned that high fuel costs will continue to dent profit margins into the year-end. In Europe, airlines were facing turbulence from geopolitics and rising jet fuel prices, despite strong demand on regional and Atlantic routes during the peak season. Capacity constraints and stubborn inflation outlook may weigh on profit outlooks.
The freight services segment went into a sharp share price correction during the month as unfavourable macro-economic conditions have impacted global demand.
Moreover, during the quarterly conference call, UPS had to lower its full-year sales outlook due to a series of disruptions and lost clients linked to its month-long labour dispute.
Fund Performance
The overall performance of the fund was positive.
Within transportation, overall long positions in the product and crude tanker segments had a positive performance contribution of +1.1%. On the other hand, short positions in the freight forwarding and freight services segments contributed +1.0% Additionally, short positions in other transportation sectors had an overall positive contribution of +2.4%. during the month. On the other hand, long positions in the dry bulk segment and a net long position in the aviation segment were negative contributors of ca. -0.3% and -1.1% respectively.
In the energy segment, the fund had a positive performance contribution in the exploration and production sector of +0.3%. On the other hand, long positions in the oil services and renewable energy sector have contributed negatively with -0.5% and -0.7%. Overall hedging positions via index futures have added another +0.81% to the overall performance result.
For more information, you can find our latest Fact Sheet – October 2023.
Seahawk Investments GmbH
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Please note that the information from Lipper Leaders relates to the previous month. All rights reserved. Lipper Leaders – © 2023 Lipper Lipper Leaders Ranking Crite[1]ria – Ratings from 1 (low) to 5 (high) First Number = Total Return; Second Number = Consistent Return; Third Number = Preservation; Fourth Number = Expense