The first half of the year was very positive on the equity markets. That is also reflected in our especially broadly diversified global portfolio, as well as in our sustainable portfolio. So that we can pursue our investment goals in the sustainable portfolio even better in future, we have made a few smaller adjustments there.
Big tech stocks in a nosedive, small caps in demand: it had been quite a while since this constellation last appeared on the US equity market. The triggers for the shift included inflation data. On 11 July it emerged that the US inflation rate had fallen by 0.3 percentage points in June compared with the previous month, to 3.0 percent. Speculation about imminent interest-rate cuts immediately set in - cuts that would benefit smaller companies in particular.
In the first half of the year, it was mainly large companies, especially from the tech sector, that had carried a dynamic upward movement. Among the popular tech stocks, however, some had practically been longing for a "cleansing storm". After all, valuations were already at extremely high levels. Mixed quarterly figures - from Alphabet and Microsoft, among others - then temporarily dampened expectations for future business performance that had been set too high.
Equity portfolios on track
Despite the correction, the equity markets are still comfortably in positive territory for the year so far. The overall very positive result is also reflected in our global and our sustainable portfolios. In the first half of the year, their performance - after fees and third-party costs - was at a level that roughly corresponds to the long-term average annual returns of the global equity markets. For instance, the average annual return of the MSCI ACWI global equity index over the past 20 years, calculated in euros and including dividends, was 7.96 percent (as of 30 June 2024).
Harnessing the long-term return potential of the global equity markets is the goal of our portfolios. We achieve this through especially broad diversification grounded in scientific findings. The global quirion portfolio holds stakes, via ETFs, in around 8,000 companies from more than 70 countries, including many small caps. This makes the portfolio well positioned for long-term wealth building, independent of the short-term performance of individual sectors.
Interest-rate speculation moves the markets
For quite some time now, a key driver of market performance has been the interest-rate policy of the central banks. In the first half of the year, too, economic data was scrutinised above all for signs of easing inflationary pressure - signs that would feed the hope of falling key interest rates. While the ECB did indeed cut rates in June, the Fed's first rate move is still pending.
At the end of last year, many had expected earlier and steeper interest-rate cuts, especially in the US. In anticipation of this, bond prices had already risen sharply early on. When those hopes were initially dashed, it weighed on prices. Our portfolios were affected by this too. Even so, in the first half of the year the bonds in our portfolios once again fulfilled the fundamental role of the bond component, namely cushioning the price swings of the equity component.
Small adjustments in the sustainable portfolio
To pursue the investment goals in the sustainable portfolio even better in future, we have made a few smaller adjustments there. For the equity-market factors "value" (value stocks) and "size" (smaller companies), we further optimised their weightings - through slight quota adjustments to individual ETFs. On the bond side, we reduced the share of the Amundi Euro Government tilted Green Bond ETF and, with the iShares USD Development Bank Bonds ETF, added further development-bank bonds to the portfolio.
At the same time, we have already carried out the regular rebalancing in the sustainable investment strategies. The background: prices on the markets are constantly on the move. As a result, the weightings within the individual portfolios keep shifting - and with them, gradually, their risk profile as well. With a rebalancing, we usually offset such effects of price fluctuations once a year. After the rebalancing, the weightings are back in line, and the portfolio matches the intended risk profile.
