The rally has already gone most of its way

The year 2023 is off to a great start for the equity world. But the markets remain in the grip of geopolitics and persistently high inflation on both sides of the Atlantic. Ethenea’s Senior Portfolio Managers explain how the Ethna-funds are positioned for an uncertain backdrop and volatile markets.

“Our base case scenario assumes that the American and European economies slow down, but a technical recession is avoided and the inflation rate remaining sticky,” says Volker Schmidt, Senior Portfolio Manager of Ethenea’s Ethna-DEFENSIV fund, which mainly invests in fixed income markets.

In its updated Economic Outlook, the IMF forecasts growth of 1% in the U.S. and 0,5% in the Eurozone for 2023. The most important reasons for the improving prospects are the reopening of China as well as falling energy prices in Europe. “Despite adverse risks have moderated since October 2022, they remain tilted to the downside”, says Volker Schmidt. “As the central banks seek to navigate a narrow channel towards the soft landing, any deviation from the envisioned path is likely to bring economic struggle.”

On the one hand, a plethora of indicators are pointing to an impending recession in the near future; inverted yield curves, leading indicator indices, and several sectors already seeing a recession such as housing and manufacturing in the U.S. On the other hand, if the Fed’s policy turns out to be not sufficiently restrictive, strong economies will cause central banks to fear that inflation will not crest and fall to 2% and then high (and even higher) rates are likely to stay with us in 2023.

Volker Schmidt : “Therefore, instead of taking greater risks to achieve higher returns, we strive to make the portfolio of the Ethna-DEFENSIV fund resilient and aim for investments that should be able to maintain their values in a possible recession or a tighter monetary policy. With our fairly conservative portfolio as a starting point, we might unwind our defensive positions and increase portfolio duration in the second half of the year if we see economic difficulties resolving. But for the time being we maintain our view that a cautious attitude is appropriate. At the same time, we are looking to selectively allocate funds to attractive new debt issuance without restrictions on maturities.”

Do not chase this rally

After a gloomy 2022 for equities, we witnessed a strong equity recovery since October in the US, Europe, and also Asia. How sustainable is this recovery? Within a short time, many indices have already recovered a large part of the losses of the past year. European indices - such as the DAX or the EURO STOXX 50 - are only about 5% below their all-time highs reached 13 months ago. The more technology-oriented S&P 500, on the other hand, is still missing 15% to reach its all-time highs. Calculated from the respective lows, a remarkable performance was generated on both sides of the Atlantic in only four months.

“Although a recession seems to be avoided economically, growth expectations are still average to the maximum,” says Michael Blümke, Senior Portfolio Manager of Ethenea’s Ethna-AKTIV fund. “Against the backdrop of further declining returns, we believe that many stocks have risen too much and too fast in the short term. Against the expectations, we are again experiencing the so often quoted "Fear Of Missing Out" (FOMO). This rally is by far not sustainable - in the sense of "it will continue in the same way". For example, the P/E ratio of the S&P500 (calculated on expected returns) has already reached a level comparable to the environment identified as expensive directly before the Covid crisis. However, we are comfortable with the idea that we have already seen the lows. With reservation that a bottom is indeed forming in profit expectations, consolidations from this level should be seen as buying rate. We do not advise chasing this rally.”

Preference for US stocks

Michael Blümke favors a specific regional area for his portfolio for the coming weeks/months : “For some time now, we have limited the selection for our equity portfolio exclusively to US stocks. In principle, this approach is questioned on a continuous basis, but despite the current "renaissance" of stocks from the Europe and Asia, there is still no reason to deviate from it. Especially if one considers that the underperformance of the American benchmark index has been caused mainly by the megacaps and their weighting in the index. We continue to focus on large American stocks with a convincing market position.”

Could dividend stocks be a good option in the Ethna-AKTIV portfolio? “Our equity portfolio is a high-quality reflection of the US benchmark index,” says Michael Blümke. “By focusing on high-dividend stocks, we would enter into a style and sector bias, which we do not want. Even if these stocks perform very well in crisis years (such as 2022), they are not as strong in growth in the long term and our approach of being able to hedge the base portfolio with index derivatives at any time without too much base risk would no longer be feasible.”

Flexibility and patience

Although the overall strategic equity market evaluation has improved since the beginning of 2023, it is still not good,” says Christian Schmitt, Senior Portfolio Manager of Ethenea’s Ethna-DYNAMISCH fund. The current reporting season shows that the economic risks are only slowly materializing. With falling profit expectations and the recent rise in equity prices, valuations – especially in the USA – have increased again significantly.

“We therefore assume that the rally has already gone most of its way. Our bottom-up perspective confirms this view: currently, no particularly attractive entry opportunities are crystallizing in individual single stocks. From a tactical perspective, we are therefore more inclined to reduce the net equity exposure again. Flexibility and patience continue to be important attributes for us.”

Press contact

Wim Heirbaut

Senior PR Consultant, Befirm

Get updates in your mailbox

By clicking "Subscribe" I confirm I have read and agree to the Privacy Policy.

About Ethenea

ETHENEA offers a wide range of attractive investment opportunities for different investor profiles: risk-minimised, balanced and equity-focused.

Capital preservation and the achievement of stable long-term returns are key components of the investment philosophy of the Ethna Funds. The fund management consistently realises this objective through active management and flexible asset allocation across various sectors and asset classes.

ETHENEA wants to make a contribution and offer responsible and sustainable investment solutions. Therefore, ESG criteria are an important part of the investment processes of all Ethna Funds (Article 8 SFDR).

Further information and legal information can be found at


PRESS RELEASE – not an official document

We would like to point out that all data and information made available to you has been thoroughly researched by ETHENEA. However, with regard to its correctness and completeness, we cannot assume any liability or warranty for damages incurred either by the recipient of this information or by third parties, either directly or indirectly. In the event that this text is published in any form and to any extent, the publishing entity (editorial office of the newspaper or associated or commissioned third parties, website, podcast, etc.) is obliged to include the necessary disclaimers and legal notices. In addition, in this context, we refer to our legal information: The information contained in the attached document does not constitute a solicitation, offer or recommendation to buy or sell units in the fund or to engage in any other transaction.  It is intended solely to provide the reader with an understanding of the key features of the fund, such as the investment process, and is not deemed, either in whole or in part, to be an investment recommendation. The information provided is not a substitute for the reader's own deliberations or for any other legal, tax or financial information and advice. Neither the investment company nor its employees or Directors can be held liable for losses incurred directly or indirectly through the use of the contents of this document or in any other connection with this document. The currently valid sales documents in German (sales prospectus, key information documents (PRIIPs-KIDs) and, in addition, the semi-annual and annual reports), which provide detailed information about the purchase of units in the fund and the associated opportunities and risks, form the sole legal basis for the purchase of units. The aforementioned sales documents in German (as well as in unofficial translations in other languages) can be found at and are available free of charge from the investment company ETHENEA Independent Investors S.A. and the custodian bank, as well as from the respective national paying or information agents and from the representative in Switzerland. The paying or information agents for the funds Ethna-AKTIV, Ethna-DEFENSIV and Ethna-DYNAMISCH are the following: Austria, Belgium, Germany, Liechtenstein, Luxembourg: DZ PRIVATBANK S.A., 4, rue Thomas Edison, L-1445 Strassen, Luxembourg; France: CACEIS Bank France, 1-3 place Valhubert, F-75013 Paris; Italy: State Street Bank International – Succursale Italia, Via Ferrante Aporti, 10, IT-20125 Milano; Société Génerale Securities Services, Via Benigno Crespi, 19/A - MAC 2, IT-20123 Milano; Banca Sella Holding S.p.A., Piazza Gaudenzio Sella 1, IT-13900 Biella; Allfunds Bank S.A.U – Succursale di Milano, Via Bocchetto 6, IT-20123 Milano; Spain: ALLFUNDS BANK, S.A., C/ Estafeta, 6 (la Moraleja), Edificio 3 – Complejo Plaza de la Fuente, ES-28109 Alcobendas (Madrid); Switzerland: Representative: IPConcept (Schweiz) AG, Münsterhof 12, Postfach, CH-8022 Zürich; Paying Agent: DZ PRIVATBANK (Schweiz) AG, Münsterhof 12, CH-8022 Zürich. The paying or information agents for HESPER FUND, SICAV - Global Solutions are the following: Austria, Belgium, France, Germany, Luxembourg: DZ PRIVATBANK S.A., 4, rue Thomas Edison, L-1445 Strassen, Luxembourg; Italy: Allfunds Bank S.A.U – Succursale di Milano, Via Bocchetto 6, IT-20123 Milano; Switzerland: Representative: IPConcept (Schweiz) AG, Münsterhof 12, Postfach, CH-8022 Zürich; Paying Agent: DZ PRIVATBANK (Schweiz) AG, Münsterhof 12, CH-8022 Zürich. The investment company may terminate existing distribution agreements with third parties or withdraw distribution licences for strategic or statutory reasons, subject to compliance with any deadlines.