General Market Review
The month of April was volatile for global risk assets. Markets tumbled following Donald Trump’s “Liberation Day” announcement on April 2, with the S&P down over 11% at its lowest point. This was its largest two-day nominal market loss in history. The turmoil was exacerbated by retaliatory measures from China on April 4, including a 34% tariff on U.S. goods, and concerns over escalating trade tensions. Asian equity markets were similarly affected dropping by 7% (China) to 12.6% (Hong Kong). However, sentiment improved sharply on April 9 when the US administration announced a 90-day pause in global tariffs with the exception of China where tariffs were raised further up to 125% subsequently. Markets interpreted this as a sign that Trump remain sensitive to financial conditions, easing fears that he might ignore market reactions entirely. The S&P500 recovered and ended the month nearly unchanged after a seven-day rally – the largest since 2020. Nonetheless, this will hardly change the underlying economic risks as tariff uncertainty will remain for a prolonged period. In response to the economic uncertainty, central banks adopted a cautious approach. Those two central banks with the greatest influence on capital markets movements followed different approaches: the Federal Reserve held its policy rate steady at 4.25% (lower bound) to 4.5% (upper bound), whereas the ECB cut its key policy rate by 25 Bp from 2.5% to 2.25%. ECB-chair Lagarde emphasized that the disinflation process was on track with inflation projections aligning with previous outlooks. In the US, the labour market was stronger as non-farm payrolls increased by +228k in March from +151k in February. The unemployment rate was slightly higher at 4.2% in March. In the Eurozone, the unemployment rate was unchanged at 6.2%. In the US, consumer price inflation for the month of March was below consensus and lower than in the prior month. Headline inflation has only increased by +2.4% (y-o-y) whereas core inflation (excluding energy and food) came in at +2.8% (y-o-y). In the Eurozone, consumer price inflation figures for the month of March came in lower versus the prior month. Headline inflation has increased by +2.2% whereas core-inflation by +2.4% respectively. US 10-year treasury yields decreased by 5 Bp from 4.21% to 4.16%. On the other hand, German 10-year bund yields have decreased by +30 Bp from 2.74% to 2.44%.
The MSCI World Index increased by +0.9% (USD den.) and the MSCI Europe Index declined by -0.8% (EUR den.).
Energy and Transportation
On the 9th of April 2025, brent crude oil prices dropped below $60 per barrel for the first time in four years as Donald Trump pushed ahead with tariffs, before bouncing back to $ 66 when the US President announced a 90-days pause on countries except China. Despite the 90-day pause, the ratcheting of tariffs in China actually worsens the global growth outlook and is thereby dampening global oil demand. Brent oil prices closed at $ 63 per barrel at the end of the month and thereby 15% lower. All the big European Oil majors sold-off throughout the month. The Stoxx 600 Oil & Gas Index (Euro denom.) dropped by -10.9% as index heavy-weights BP, Shell and Total Energies have corrected sharply. On the 29th of April BP has reported 1st Quarter Earnings. BP cut its share buyback program to $ 750mn. per quarter from $ 1.75bn. after reporting weaker-than-expected earnings. That will bolster the company’s balance sheet, which is carrying a relatively high debt load. Part of the drop in earnings was down to lower oil prices. BP’s plan is now to focus on more oil and gas production, a reversal of the previous strategy that called for lower fossil fuel output and more spending on low-carbon energy sources. On the other hand, the S&P Global Clean Energy Transition Index was up by 3.5% in the month and thereby up by a moderate 3.4% YTD. All transportation segments were in negative territory. The DJ Transportation Average Index (USD) fell by -11.9%. whereas the Russell 2000 Marine Transportation Segment (USD) fell by -8,0%. The US Global Jets Index (USD) dropped by -9,2%. American Airlines has reported 1st quarter earnings on the 24th of April which has disappointed investors. Its EBITDAR margin fell by 250 bps to 5.1% as higher yields and lower fuel prices could not offset declining load factors. Within the freight services segment UPS has reported 1st quarter earnings on the 29th of April. Despite the fact, that earnings have improved sales fell. Given the escalation of tariff rates UPS was not providing any updates to its previously issued full year outlook. Within the shipping sector most sub-segments were down. In particular, the dry bulk segment suffered as well as a few container liner operators. In addition to the newly announced tariffs a new USTR (US Trade Representative) port fee proposal on Chinese operators and vessels was introduced. The new fee proposal will have a meaningful impact on Containers and Car Carriers. The SCFI (Shanghai Containerized Freight Index) fell by another -1% in the month and thereby-31% year-on-year. On the other hand, the crude tanker segment was strong as VLCC spot rates have increased by ca. 25% in the month up to $ 60k/day and Suezmax spot rates by ca. 10% up 10% in the month up to $ 50k/day.
Fund Performance
The fund performance of the USD share class was positive whereas the EUR share classes were still negative at the end of the month as the USD has weakened. The introduction of global tariffs by the US government has triggered a sell-off in cyclical stocks. In order to reduce the fund’s equity market risk US airlines as well as full-service airlines with a US exposure were further reduced to 0% of NAV. The overall aviation exposure was reduced from 8.5% of NAV to 5% of NAV at month end leaving the fund with long positions in the European budget airline sector (Ryanair and EasyJet). Both airlines have proven to be resilient throughout the year as travel demand in Europe is holding up well. Apart from the aviation segment further short engagements were built up in the oil and gas, the container liner segment as well as in other transportation stocks, thereby reducing the net equity exposure temporarily to 20%. Within transportation both the shipping long as well as the short book had a positive contribution of +1,2% and +0.5% respectively. Long positions in the crude/product, dry-bulk and offshore supply segments contributed +1.8%, -0,4% and -0,2% respectively. Short positions in the container segment have contributed + 0.5%. In early April eight OPEC members surprised the market by announcing plans to boost headline oil output in May by appr. 400k barrels/day from a previously targeted 122k barrels/day. In the near future, higher OPEC supply is expected to support the crude tanker segment. The fund held long positions in the crude tanker segment, where Frontline was its strongest performance contributor with +1.0%. Frontline is operating a large fleet of Very Large Crude Carriers (ca.62%), Suezmaxes (ca. 20%) as well as LR2s (18%). Frontline’s spot exposure in the larger crude tanker segments supported the stock. On the other hand, short positions in the freight services segment as well as other transportation sectors has contributed a positive +0.8% and -1.8% respectively. Long position within aviation and other transportation sectors have contributed +0.4% and +0.3% respectively.
Within energy the oil and gas short book was able to contribute +0.8% whereas long positions in exploration and oil field services have contributed +0.6% and -1.4% respectively. Overall hedging positions via short index futures had a neutral effect.
For more information, you can find our latest Factsheet – April 2025.
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