The capital market environment has calmed down significantly again following the banking turbulence last month. Following intervention by central banks, regulators and finance ministries, the turbulence in the banking sector subsided more strongly. Volatility, as measured by the VIX, subsequently marked a new low for the year.

One can clearly see: Interest rate differentials are erupting at various points in the capital markets, causing sharp fluctuations in capital flows. This was seen most clearly at U.S. banks. The flight out of individual institutions’ deposits, as recently seen again at First Republic Bank into money market funds or into short-dated bonds yielding around 5%, will continue and recur as long as interest rate differentials for deposits at banks diverge so glaringly. In an environment of inflation rates of over 5%, the high volume of savings has no choice at all. This also applies to European banks. They will have to raise their interest rates on deposits significantly in order to hold on to capital.

The stock markets continue to be capped by the interest rate trend because inflation rates and escalating geopolitical risks are severely limiting the prospect of falling interest rates. Yields in major currencies continue to drift higher. All in all, however, the inflation figures and the labor market data suggest that the U.S. central bank will take a milder approach. The quarterly results published so far, most of which were better than expected, also have a supportive effect. The EuroStoxx 50 Index and the S&P 500 Index gained 1.8% and 1.6%, respectively, last month.

The Premium Income fund lost -0.40% over the period. While the Bond portfolio and the PutWrite component posted gains, Relative Value suffered losses. Volatilities in the individual stocks were too low. Among the biggest losers were positions on Sanofi, Lucid and Rivian. In contrast, positions on Adidas and Stellantis developed positively.