General Market Review
Both equity and bond markets have shown positive returns in the month of May, as market participants were optimistic about potential rate cuts starting this summer. Global bonds have generated positive returns. Expectations about falling interest rates have particularly put the growth sectors of the stock market back into investors’ favor.
US economic data has remained solid, but the data released in May has given indication of some sign of moderation. Whilst the flash Purchasing Manager Index (PMI)continued to show strength with the Manufacturing index and the Services Index rising to 50.9 and 54.8 respectively, the labor and real estate market weakened. Non-farm payrolls and private payrolls increased by only +175k and 167k for the month of April versus a previous reading of +315k and +243k. New home sales fell by -4,7% in the month of April.
On the other hand, the Euro area economy gave further signs of improvement. The Eurozone Composite PMI rose to 52.3 for the month of April from 51.7 in the previous month. The services sector continued to act as the key pillar of strength.
The development of longer-term interest rates has given some relief to investors. The US 10-year treasury yield has decreased from 4.7% to 4.5%, while the German 10-year Bund yield was unchanged at 2.6%.
In the US, the consumer price index for the month of April came in at +3.4% vs. 3.5% (headline) and +3.6% (core) vs. 3.8% in the previous month.
In Europe, inflation readings have moved up slightly. The Euro-Area Consumer Price Index came in at 2.6% (headline) and 2.9% (core) for the month of April.
In this environment, the MSCI World Index gained by +4.5% (USD den.) whereas the MSCI Europe Index was able to add +4.9% (EUR den.).
Energy and Transportation
Oil prices eased throughout the month on worries over weak U.S. gasoline demand at the start of the driving season, US gasoline demand fell to 9.2 mn. barrel/day at the end of the month leading to a surprise jump in gasoline inventories. U.S. gasoline consumption represents 10% of global oil demand. Weaker refined product markets initiated a slump in overall oil prices at the end of the month. The price of Brent Oil fell from $ 87.8 per barrel to $ 81.6. The Stoxx 600 Oil and Gas Index (EURO denom.) fell by -0.3 % in May.
On the other hand, the interest sensitive renewable energy sector was able to recover from the previous month losses as growth stocks came back into favor. The S&P Global Clean Energy Sector Index gained by +12.7% in May. With that the renewable energy segment is still down by -4.1% year-to-date.
Transportation segments were mixed during the month. The DJ Transportation Average Index gained by a moderate +2.5% lagging the broad market indices. The airline segment was the weakest. The US Global Jets Index dropped by -0.6%. American Airlines guidance has weighed on the market sector. Total revenue per available seat mile was expected 5-6 % lower than the year ago quarter and thereby worse than expected. This gave further evidence that air fares in the airlines sector may soften.
The Russell 2000 Marine Transportation Index has increased by +16.7%. Shipping stocks were further supported by the ongoing disruptions in the Red Sea. These disruptions had the strongest impact on the container shipping as well as the product tanker segment as vessels continued to be rerouted around the horn of Africa, thereby adding 15 to 20 days of voyages. Container freight rates have increased further by another +7% in the month of May. The SCFI (Shanghai Containerized Freight Index) is now up by +175% year-on-year. Crude oil tanker (VLCC – Very Large Crude Carrier) rates have softened to $27k/day at month end, whereas product tanker rates (MR earnings) have strengthened from $ 31k/day to $47.5k/day at month end. VLGC (Very Large Gas Carrier) rates have increased further from $54k/day to $72.5k at month-end. Freight rates in the LPG sector continue to be supported by congestion in the Panama Canal.
Fund Performance
The fund performance of both the USD as well as EUR denominated share classes were positive.
Within transportation the shipping long book had an overall positive contribution of +3.6%. Long positions in the crude/product/chemical, dry-bulk as well as offshore-supply segment contributed a positive +2,4%, +0.6% and +0.5% respectively. On the other hand, the short shipping book in the container and LPG segment had a negative contribution of -1.0%.
In the area of freight services, the short book had a positive contribution of +0.1% whereas short positions in other transportation segments had a negative contribution of -1.1%. The aviation long book was negative with a contribution of -0.2%.
Within the energy segment both long and short positions in the oil & gas segment had a positive contribution with the long book adding +0.9% and the short book adding + 0,3%. In addition, a long exposure in the utility segment had a positive contribution of +0.1%.
Overall hedging positions via short index futures have contributed negatively by ca. -0.2% to the overall performance result.
For more information, you can find our latest Factsheet – May 2024.
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 – © 2024 Lipper Lipper Leaders Ranking Criteria – Ratings from 1 (low) to 5 (high) First Number = Total Return; Second Number = Consistent Return; Third Number = Preservation; Fourth Number = Expense