General Market Review
Moderating inflation data lead to a sharp decline in bond yields. The US-10 yr-treasury yield fell sharply by ca. -60bps throughout the month to a level of 4.3%. Global equity markets saw a rally with investors expecting monetary easing.
In the US, the consumer price index for the month of October came in below expectations at +3.2% (headline) and +4.0% (core). A Federal Reserve’s change in tone and robust earnings growth in the third quarter led to a strong rally in the equity markets.
US economic data remained resilient, but there were other signs that the US economy is cooling. Non-farm payrolls and private payrolls increased by 150k and 99k for the month of October versus a previous reading of 262k and 199k in the previous month, Additionally, durable goods orders and capital goods orders have stagnated during the month of October.
In Europe, inflation readings have shown the same declining trend as in the US. The Euro-Area Consumer Price Index came in at 2.4% (headline) and 3.6% (core) vs. 2.9% and 4.2% in the prior month. European economic activity has remained at depressed levels with the Eurozone Manufacturing Purchasing Manager Index at 43.1.
The MSCI World Index gained by +9.4% (USD den.) and the MSCI Europe Index by +6.4% (EUR den.).
Energy and Transportation
The price of Brent oil fell a second month in a row from $ 87.4 per barrel to $ 82.8 as a weakened global demand outlook has weighed on the market. Moreover, receding concerns about spill-over effects from war in the Middle East – sent oil prices lower. The OPEC + Consortium was unable to support the market as a production meeting had been postponed to the end of November,
The Stoxx 600 Oil and Gas Index has still shown resilience with a small gain of +0.44 % in November as renewable energy companies (smaller constituents) performed strongly on the back of lower longer term interest rates. The S&P Global Clean Energy Index gained by +9.4%.
Transportation segments recorded a strong performance. The Dow Jones Transportation Index gained by +8.4% and the US Global Jets Index was nearly able to reverse the previous month losses in full and gained by +12.9% during the month of November. The Russell 2000 Marine Transportation Index increased by +4.63%.
The dry bulk segment has shown strength throughout the month. Capesize-rates gained from $ 17k/day to $ 47/day at the end of the month. In the container freight market, the SCFI (Shanghai Containerized Freight Index) decreased by -1% compared to the previous month. The SCFI index is still down -15% year-on-year. Crude oil tanker (VLCC – Very Large Crude Carrier) rates were stable throughout the month with VLCC rates closing at $ 47k/ day at the end of the month, whereas product tanker rates (MR earnings) were able to stabilize. VLGC (Very Large Gas Carrier) rates have remained at ultra-high levels of around $130k/day at month-end.
Sliding oil prices were a tailwind to the airline industry which allowed investors to look past fare weakness. Therefore, the sharp decline of this industry segment during the month of October was nearly compensated in November. The freight services segment was able to benefit from the overall positive market trend during the month of November.
Fund Performance
The fund performance of the USD share classes was positive whereas it was negative for the EUR share classes. The USD has depreciated vs. the EURO by ca. -2.9%.
Within transportation long positions in the dry bulk shipping segments had a positive performance contribution of +1.2%. As the oil price continued to be under pressure, long positions in the in the offshore supply vessel segment could not escape the trend. Long positions had a negative impact of ca- -1.2%, albeit this industry segment is expected to continue to benefit from a tight supply balance in the market. In contrast to that, falling oil prices were a relief to the airline industry and the fund’s overall net-long position in the aviation segment had a positive contribution of +1.5%. On the other hand, short positions within the freight services segments have contributed negatively by -0.46%.
In the energy segment the fund a net long position with the oil services and exploration and production segment had contributed negatively by ca. -0.66% whereas long positions in the LNG infrastructure segment had a positive contribution of +0.77%.
Overall hedging positions via index futures has contributed negatively by ca. -0.75% to the overall performance result.
For more information, you can find our latest Fact Sheet – November 2023.
Seahawk Investments GmbH
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