The turbulences of the financial markets

The markets are on the move, and everyone is waiting to see what will happen. We would like to inform you about the factors that have led to this and how they influence the positioning of the Ethna Funds.

What is causing those turbulences?

Weaker US macroeconomic data last week, following the FED's decision not to cut interest rates in July, has led to a period of higher market volatility.

US Government bond yields are already pricing in 5 rate cuts by the end of the year and a total of 9 by mid-2025. For the ECB, market participants are already pricing in 6 rate cuts by June 2025.

ETHENEA continues to view a US-recession as unlikely, despite the fact that some market participants like to spread this fear again!

We continue to believe in a strong underlying US economy, a relatively robust US labour market and slightly declining inflation trends.

Ethna-AKTIV

Ethna-AKTIV currently holds around 63% in fixed income assets with an underlying modified duration of currently 3.94. This has been increased over the last few weeks by overlaying the portfolio with a US Long Bond Futures exposure, bringing the total duration to 8.2, well prepared for a potential shock scenario.

In the asset class Currencies, the Ethna-AKTIV currently holds about 26% in open USD Exposure, the remaining foreign exchange held securities exposure have been hedged.

In the currencies asset class, Ethna-AKTIV currently holds about 26% in open USD exposure, the remaining foreign currency exposure has been hedged.

Ethna-AKTIV currently holds a neutral, broadly diversified equity allocation of 30% net (max. 49%), exclusively in large-cap US companies. We are significantly underweight in the recently very volatile FANG+ names. In particular, Apple, Broadcom, Netflix, Tesla and where the fund has no position.

In summary, we expect the Ethna-AKTIV to navigate much more smoothly through periods of economic uncertainty and high market volatility.

Ethna-DEFENSIV

The 10-year US Treasury yield of 3.75 % and the German Bunds at 2.15 % already reflect a very aggressive anticipation of significantly lower central bank rates. Regardless this tendency could even continue a little longer and become more pronounced, due to the typically missing market-Liquidity in the summer months.

Ethna-DEFENSIV's portfolio is made up of 90% high-quality rated bonds. The fund holds 20 % of its assets in government bonds, 50 % in investment grade corporate bonds. The total modified duration is 5.2 years, making the fund particularly well positioned for periods of market turbulence.

Ethna-DYNAMISCH

The Ethna-DYNAMISCH fund currently has a net equity quota of 75 %. 42 % of the portfolio is held in USD equities, 31 % in European equities and the remaining 2 % in Asian equities. This keeps the fund's equity exposure well below the maximum possible equity allocation of 100 %

The fund's recent selection bias has been towards defensive names, such as healthcare and consumer staples. The 4 largest individual holdings are in these sectors. Additional flexibility and defensiveness are provided by a 15% holding in EUR-denominated, short-duration AAA-rated government bonds and a 10% cash position.

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