Portfolio Management Report April 2025: Between System Stress and Substance — Strategies for Stability in Fragile Markets
The oldest surviving work on contemporary monitoring of stock market events dates from 1688 and was written by Joseph de la Vega under the title “The Confusion of Confusions.” To this day, this book is regarded as a milestone in capital market analysis, whose precise observations of human behavior on the stock market have lost none of their relevance even more than three centuries later. A certain amount of chutzpah is required when a US president declares an economic war on the world and at the same time expects it to continue to willingly finance America's debt — under political pressure if necessary. The irony is that Donald Trump may be destabilizing the very open, rules-based global economic system that the USA itself played a decisive role in shaping with the decisions of Bretton Woods in 1944 (replacement of the former world currency British pound by the rising American US dollar). The establishment of the US dollar as a global leading and reserve currency has enabled the United States to have favorable refinancing options and continuous growth over decades. US Treasury Secretary John Connally put it in a nutshell in 1971: “The dollar is our currency, but your problem.” When historical parallels are sought, this is often an indication of extraordinary times. President Trump's first term does not, in fact, provide a reliable blueprint for his second. His erratic statements act like impulses that can set capital markets in one way or another at any time — often abruptly and without any discernible pattern.
Geopolitics meets capital markets: When political rhetoric creates systemic risks
The month of April is an impressive example of this with noticeable distortions in stock, bond and currency markets. The escalation began at the beginning of the month with the so-called “Liberation Day,” on which the US government announced nationwide tariffs — on the grounds of freeing the USA from unfair trade conditions. In fact, it marked the beginning of a period of heightened geopolitical uncertainty. It is not only the economic consequences of the tariffs, but above all Trump's unpredictable behavior that is unsettling investors worldwide. With the introduction of blanket (and economically difficult to understand) import tariffs by the US government — initially 10%, in many cases significantly higher — Trump has launched a trade war that tests all usual market mechanisms. The reaction of the capital markets was correspondingly severe: Stocks, bonds, commodities and currencies came under pressure at the same time. For example, the S&P 500 lost over 10% in phases in the first half of April; the Nasdaq recorded a brief recovery, but this proved to be just as unstable as the underlying policy. Intraday fluctuations of more than 6% on five consecutive trading days show that the market currently only provides a limited basis for a reliable assessment of valuation levels. It is particularly remarkable that the US government bonds, which are considered “safe havens,” were also unable to escape this loss of confidence. Instead of fleeing into these liquid securities, as in comparable crises, investors sold them on a large scale — returns rose significantly. At the same time, the US dollar fell across the board. Such a synchronous triple correction is a clear indication of systemic stress. The fact that professional investors are turning their backs on the US currency and American investments on a large scale, especially in a stressed environment, is truly a historic anomaly.
Bond vigilantes, tariffs and currency crises: markets enforce fiscal discipline
The irony, despite all the nervousness of the capital markets, was probably precisely this that prevented a further escalation, because the “Bond Vigilantes” are back as a corrective. This “bond vigilante,” once a myth of the 1980/90s, is once again setting clear limits: Anyone who engages in excessive government spending is sanctioned by rising returns and falling prices. Market players recently forced the US government to make a temporary U-turn. After a jump in 10-year yields to 4.5% p.a., Trump announced a 90-day break in his reciprocal tariffs, albeit only for trading partners who have not yet imposed retaliatory tariffs, which continues to impose tariffs of 145% on big rival China and continues the escalation spiral. China, in turn, is clearly showing that tariffs are not the only weapons that can be used as weapons. Export controls for critical raw materials (keyword rare earths), pharmaceutical raw materials or lithium batteries could hit the USA massively. In addition, despite historical differences, China, Japan and South Korea are moving closer together economically. An “America first” threatens to become an isolated “America alone.” The message from bond markets is clear: Fiscal discipline is no longer a voluntary act, it is enforced by the market. In an environment of growing uncertainty and fragile political decisions, quality and liquidity remain the hardest currencies. To make matters worse, the relationship between President Trump and Fed Chairman Jerome Powell is characterized by unprecedented tension. Repeated public attacks on central bank independence, including threats to fire Powell, have the potential for severe losses of trust — not just in the Fed, but in the stability of the US currency and global financial architecture as a whole. The latest insults (“Mr. Too Late” and “Major Looser”) could be interpreted as a return to a speech by Powell, where he said that the US tariff policy was weakening the economy and leading to higher inflation. In the long term, there is a risk that, as a result of these politically motivated interventions, US assets will no longer be traded at a growth premium but at a risk discount. In the meantime, Trump rhetorically backfired here as well: “He has no intention of firing the president of the central bank.” Loosely based on Konrad Adenauer: “What do I care about my chatter from yesterday.”
In this changing and “breaking news” driven environment, it remains crucial for us in portfolio management to remain alert, diversify broadly and maintain a tactical liquidity ratio in order to be able to react flexibly to sudden market disruptions. In the short term, it is important to remain calm and review positions for their resilience and pricing power. We have been underweighting heavily leveraged or cyclical investments for a long time. At the same time, we selectively use market-related sell-off phases for targeted position building. The long-term remains decisive: The markets are adaptable, but they need reliable framework conditions. As long as these do not exist, there is no alternative to a disciplined, fact-based investment approach. In this phase, it is not the loudest opinion, but the most sober analysis that protects wealth and opens up opportunities.
Quality beats hope: Selective equity strategy proves successful in downward trend
The Hansen & Heinrich Universal Fund (current equity ratio 90%) was unable to fully escape the general downward pressure on global equity markets in April, but was able to significantly limit losses through active risk management. The decisive factors were a strategic underweighting of US equities — whose valuation remains at a historically elevated level — and consistent position management. Securities such as Accenture, LVMH or TSMC were specifically reduced or sold when predefined valuation or price marks were reached. In an environment of increasing uncertainty, investors are increasingly preferring business models with high reliability and transparent earnings quality over speculative growth stocks. We have been following this approach consistently for years — as exemplified by our position at Munich Re. As the world's largest reinsurer, the company combines conservative risk management with sustainable earnings stability. The insurance giant is also fundamentally convincing: A strong balance sheet, high equity ratio and the global diversification model make it crisis-resistant. The recent dividend increase from EUR 15 to EUR 20 per share — an increase of over 30% — underlines financial strength. The current dividend yield is a solid 3.4% and makes the share particularly attractive for income-oriented investors. Since 2005, for example, the dividend of EUR 2 (per share) has risen to today's level — clear evidence of long-term distribution consistency. Increasing and reliable dividends remain an effective compensator for inflation. In an environment of geopolitical tensions, regulatory challenges and rising interest rates, Munich Re remains a strategic core investment for income-oriented investors.
Stability through diversification: infrastructure and first-class bonds as pillars
The H&H Endowment Fund (current equity ratio 35%) closed April slightly down, but was able to maintain its position in positive territory over the year — and this despite the pronounced periods of weakness in almost all asset classes. Thanks to its broad diversification (just under 200 individual securities in the bond portfolio alone) — there was no need for hectic redeployments. On the contrary, we used selective resetters to expand positions in high-quality and ESG compliant securities. For example, commitments in Allianz, Intuitive Surgical, Novo Nordisk and Veolia were specifically increased. Our involvement in Vinci shares continues to develop pleasantly. Vinci is one of Europe's leading infrastructure stocks and benefits from two decisive factors: an excellent market position and a strategic focus on long-term business models that are less sensitive to economic growth. As an operator of numerous airports, motorways and transport networks, the company combines stable concession income with broad engineering expertise. Vinci is strategically well positioned in an environment characterized by structural investment needs — for example through the maintenance and expansion of transport infrastructure, urbanization and energy transition. Infrastructure investments are considered defensive and inflation-resistant, especially when, as with Vinci, they are underpinned by regulatory-backed cash flows. A key argument for Vinci from an investor's point of view is the predictable earnings situation combined with a high level of substance. Especially in phases of growing geopolitical uncertainty and volatile markets, infrastructure stocks such as Vinci offer long-term stability and continuous payouts. In the bond sector, we were able to use the reduced price levels in April to specifically secure attractive and increased yield levels. For example, securities from issuers such as ASML, Rabobank and Fresenius Medical Care were raised at a discounted level. The duration was deliberately increased. These targeted measures will strengthen the fund's sustainable payout capacity in the long term.
Increase opportunities and potential thanks to prudent liquidity management
In WowiAssets (current equity ratio 11%), we were able to take advantage of the extraordinary market movements. After both credit premiums for corporate bonds and volatility for equities rose sharply, in our opinion, both asset classes became significantly more attractive. We used the available liquidity to invest more heavily in new issues, buy up European and American stocks, increase volatility structures at attractive conditions and significantly increase the associated interest income for the portfolio in the coming months. In the past month, we were able to successfully acquire bonds from issuers Fresenius Medical Care, Ceske Drahy, Wells Fargo and Air France in order to benefit from the higher level of credit risk premiums for corporate bonds. In addition, we increased our position in an ETF for European corporate bonds in order to increase exposure to this investment class across a broad spectrum. For the equity portfolio, we made repurchases in American Express, Berkshire Hathaway, JP Morgan US Research Enhanced Index ETF, Enel and JP Morgan EU Research Enhanced Index ETF.
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