General Market Review 

Equities traded mostly sideways until December 18, when the Fed cut interest rates and adjusted its 2025 policy outlook. The 0.25% cut was expected, but the Fed’s revised guidance indicated fewer rate cuts are coming in 2025 than previously expected.

The central bank now anticipates only two rate cuts in 2025, down from the four forecasted in September. This would leave the federal funds rate at a median level of 3.9% by the end of 2025, higher than the previously expected 3.4%.

After the Fed-meeting stocks reacted by selling-off. S&P 500 lost 3% subsequently, whereas 10-year treasury yields skyrocketed around +20 bps in the aftermath of the FED’s decision to a yield of 4.6%. Never before have 10-year treasury yields increased by a cumulative change of roughly +0.95% 100 days after the FED started cutting rates. In Asia, the fixed income market has moved in the opposite direction. Given China’s subdued growth rates as well as deflationary pressures, China’s 10-year government bond yields have reached a low at 1.675%. This allows China to now borrow at lower interest rates on the capital market and thereby allowing China to spur business investment and consumer-boosting initiatives in 2025.

In the US, the labour market was stronger as non-farm payrolls increased by +227k in November from +12k in October. The unemployment rate was slightly above consensus at 4.2% in November. In the Eurozone, the unemployment rate remained stable at 6.3%.

In the US, consumer price inflation for the month of November was in line with consensus and slightly higher than in the prior month. Headline inflation has increased by +2.7% (y-o-y) whereas core inflation (excluding energy and food) remained stable at +3.3% (y-o-y).

In the Eurozone, consumer price inflation figures for the month of November came in below consensus and higher versus the prior month. Headline inflation has increased by +2.2% and core-inflation by +2.7% respectively.

US 10-year treasury yields and German 10-year bund yields have increased by +40 bps from 4.17% to 4.57% and by +28 bps from 2.09% to 2.37% respectively.

The MSCI World Index declined by -2.6% (USD den.) and the MSCI Europe Index by  -0.5% (EUR den.).

Energy and Transportation

Oil producer group OPEC+ significantly scaled back its plans for oil production in 2025. The group has pushed back plans to gradually reintroduce 2.2mn barrels a day of crude until next April and would extend to 18 months the period over which the increase would take place. The group will therefore pump in excess of 800k barrels per day less oil in 2025 than previously expected. As this is a sizeable amount the price of Brent oil has increased from $ 72.9 to $74.6 per barrel at month end. In this environment the Stoxx 600 Oil & Gas Index (Euro denom.) has decreased slightly by –1,7%.

The S&P Global Clean Energy Sector Index dropped by another -7.0% in December. With that the renewable energy segment is down by -25.5% in the calendar year 2024.

Transportation segments were mostly negative, with the exception of the aviation segment. The DJ Transportation Average Index decreased by -9.6%. Index heavy weight FedEx had reported earnings on the 19th of December. Despite plans to spin-off the freight unit, which was welcomed by investors, FedEx had to lower its revenue and earnings guidance for 2025. On the other hand, the aviation segment continued its rally. Air travel demand in the high-end leisure segment has been strong. Especially European destinations of full-service airlines were in high demand.  The US Global Jets Index has increased by +3,4%.

Given the lack of clarity on China’s fiscal spending plans the correction of the Marine shipping segment has continued during the month of December.  The Russell 2000 Marine Transportation Segment fell by -5,3%. In the dry-bulk segment Capesize-Rates have decreased from $18k/day to $ 10k/day. Container freight rates have increased by +10% in the month of December. The SCFI (Shanghai Containerized Freight Index) is still up by +40% year-on-year. Crude oil tanker (VLCC – Very Large Crude Carrier) rates bottomed-out at level of $ 20k/day at month end, whereas product tanker rates (MR earnings) were range-bound averaging $20k/day. VLGC (Very Large Gas Carrier) rates have increased from $ 43k/day to $ 45k/day at the month-end.

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 negative contribution of -2,8%. Long positions in the crude/product, dry-bulk and offshore supply segments contributed a negative -1.6, -1.1%, and -0,1% respectively. Given the sell-off in shipping stocks the tanker and dry-bulk segments are now priced with an average discount to their NAVs of 30% and 40% respectively. Given the highly attractive supply-demand fundamentals the Offshore Support Vessel stocks have stabilized, despite the ongoing weakness in the North Sea area. On the other hand, the short shipping book had a positive contribution of +0.6%. Short positions in the container and LPG segments had a contribution of +0.5% and +0,1% respectively.

In the area of freight services, the short book has a positive contribution of +0.5%. On the other hand, long positions in the aviation segment had a positive contribution of +0.7%.

Within the energy segment both long and short positions in the oil & gas and oil services segment had a positive contribution of +0.7% and 0,5% respectively. The fund’s short position in other energy segments had a positive contribution of +0.1%.

Overall hedging positions via short index futures have contributed positively by ca. +0.9 % to the overall performance result. Given strength of the US-dollar investments in non-USD denominated instruments have contributed negatively by ca. – 0.3%.

For more information, you can find our latest  Factsheet – December 2024.

Seahawk Investments GmbH

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