General Market Review
Global Equities have shown further strength during the month of December as bond yields have further declined. The US 10-yr government bond yield declined from 4.3% to 3.9% at month end whereas German 10-yr Bunds declined from 2.4% to 2.0% as disinflation continued.
In the US, the consumer price index for the month of November came in at +3.1% vs. 3.2% (headline) and +4.0% (core) vs. 4.0% in the previous month. The Federal Reserve was more dovish than its European counterparts.
US economic data was resilient. The labor market has shown further strength. Non-farm payrolls and private payrolls increased further by 199k and 150k for the month of November versus a previous reading of 150k and 99k in the previous month, Durable goods orders and capital goods orders (ex-defense) have increased by 5.4% and 0.8% during the month of November.
In Europe, inflation readings were moderate. The Euro-Area Consumer Price Index came in at 2.4% (headline) and 3.6% (core) which was at the same level as the prior month. European economic activity has remained at depressed levels with the Eurozone Manufacturing PMI (Purchasing Manager Index) at 44.2 and the Services PMI at 48.7.
The MSCI World Index gained by +4.9% (USD den.) and the MSCI Europe Index by +3.7% (EUR den.).
Energy and Transportation
The price of Brent oil fell a third month in a row from $ 82.8 per barrel to $ 77.0.
Concern over oversupply and demand caused oil prices to drop by more than -6% in the month. In the most recent short term energy outlook, the US Energy and Information Administration Institute also increased its supply outlook. Moreover, later during the month Angola decided to leave the Organization of Petroleum Exporting Countries. Even a series of red sea attacks and increasing geopolitical tensions in the Middle East were not able to stabilize the oil price.
The Stoxx 600 Oil and Gas Index has only lost -0.33 % in December 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 +10.8%.
Transportation segments recorded a strong performance. The Dow Jones Transportation Index gained by +6.0% and the US Global Jets Index continued to rally by +13.8% on the back of lower jet-fuel prices during the month of December. The Russell 2000 Marine Transportation Index increased by +6.6%.
Ongoing Houthi attacks on commercial vessels in the Red Sea led to changing trading patterns of shipping operators. Major shipping lines were forced to re-route their vessels around the Cape of Good Hope. In particular, container freight rates increased substantially throughout the month.
The dry bulk segment has moderated throughout the month. Capesize-rates fell from $ 47k/day to 29k/day at the end of the month. In the container freight market, the SCFI (Shanghai Containerized Freight Index) increased by +75% compared to the previous month. The SCFI index is up by 66% year-on-year. Crude oil tanker (VLCC – Very Large Crude Carrier) rates have moderated throughout the month with VLCC rates closing at $ 31k/ day at the end of the month, whereas product tanker rates (MR earnings) have shown strength closing the month at $36k/day. VLGC (Very Large Gas Carrier) rates have remained at ultra-high levels of around $124k/day at month-end.
Fund Performance
The fund performance of both USD share and EUR denominated share classes were positive.
Within transportation long positions in the dry bulk shipping segments had a positive performance contribution of +1.8%. Despite falling oil prices, the offshore supply vessel segment was able to reverse the previous month decline with a positive contribution of ca- +1.3%. Product tankers had a positive contribution of +0.4%, On the other hand, the short book in shipping was mixed. Short container names had a negative contribution of -0.7% whereas the fund’s short trading exposure in the LPG segment had a positive contribution of +0.2%.
Falling oil prices have further propelled airline stocks. The fund’s net long position in the aviation segment had a positive contribution of +1.5%.
Within energy both the Oil and Gas Long and Short Book had a positive contribution of +1.4% and +0.1% respectively. In addition, the renewables long book had a positive contribution of +1.1%.
Overall hedging positions via short index futures has contributed negatively by ca. -1.3% to the overall performance result.
For more information, you can find our latest Fact Sheet – December 2023.
Seahawk Investments GmbH
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