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marketview

Market view May 2021


Introduction Sell in May? The old stock exchange adage says that one should lower the equities allocation in the portfolio as temperatures rise. And historical data do in fact show that the half-year that starts on the exchanges in May is generally somewhat weaker on average than the cold time of the year. But history also shows that this phenomenon does not occur every year, and that the deviations in individual years can be extreme. So really, this so-called seasonality is a nice opener for market commentary, but not at all useful as a basis for decisions for real portfolios. Market data is a more relevant factor here, and at present the leading indicators have begun climbing towards new highs. Surveys are indicating a widespread belief that the vaccinations will allow a gradual opening and thus a successive recovery of the economy. This is also relevant for corporate earnings. Economic data serve as crucial fuel for the

equity markets, and they have a particularly high octane rating this year. Earnings will grow at impressive double-digit rates from the low base last year. Thus, this fundamental aspect of the analysis, which is dependent on the economy and corporate metrics, is rock solid. In terms of investor sentiment, positioning, and technical analysis, however, some traffic lights have switched from green to yellow. The tremendous optimism among many market participants is a warning to professional investors to be cautious, and when markets accelerate during an uptrend, this can also be a warning sign. Overall, the indicators are still painting a positive picture for the equity markets. The data also confirm the optimistic outlook for commodities because this asset class is profiting disproportionately from the economic recovery.

Overall, the indicators are still painting a positive picture for the equity markets.

Your team at marketview marketview ⅼ May 2021 ⅼ 2


Content Market conditions

Outlook

Asset allocation

Indicators

4-6

Global economy

Strategic Asset Allocation

Overview of

Market conditions, Mai

7-8 9

Money market/

13 14

15

market development

Tactical Asset Allocation

capital market

10 Bonds

11-12 Equities

marketview ⅼ May 2021 ⅼ 3


Market conditions Bond markets: Yields have stabilised 3.7%

USA high yield

2.1%

Euro high yield

-0.7% -1.7% -1.8% -2.3%

EM corporates USA corporates USA sovereigns

-2.4%

on the international markets. These conditions favour corporate bonds. Not only do

Italy sovereigns

-2.8%

EM hard currency

-3.0%

EM local currency

-3.2%

Germany sovereigns

-4.1% -4%

Euro corporates

UK sovereigns -2%

0%

2%

Returns in EUR Source: Bloomberg Finance L.P., Raiffeisen KAG, 31 Dec 2020–30 Apr 2021; as of 30 Apr 2021

A significant increase in yields was seen on the international bond markets in the initial weeks and months of the year. The impact was particularly noticeable for the USA, the UK, Canada, and Australia. Bonds from the Eurozone fared a bit better, although there was also a considerable rise in yields for these assets. As of the end of April, the yield for a 10-year Austrian government bond was roughly 0.4% higher than at the beginning of the year. However, this trend decelerated in April. With the exception of Italian instruments, government bond yields for the Eurozone are only slightly higher than at the end of March. And slightly lower yields have been seen recently

4%

these issues typically have shorter terms, which means that potential yield increases have less of an impact on the market value, but declining spreads for corporate bonds can also mitigate or even offset the rise in the general yield level. This phenomenon has materialised in impressive fashion in the high yield bond segment, which has even generated positive performance since the beginning of the year.

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Market conditions Equities still solid

16.7%

ATX

13.1%

Dow Jones Industrials

12.7%

Euro Stoxx 50

11.6%

MSCI World

10.6%

MSCI Europe

10.3%

DAX Russia

6.6%

EM Global

6.6%

4.1%

Eastern Europe China Nikke

fensive segments are typically less sought after when an economic recovery is expected or partially already

6.3%

Asia

2.6% 1.5%

-0.2% Latin America -5%

0%

5%

The international equity markets continued their positive trend in April. Gains of 2% to 3% make the antics of the previous month seem a bit more tolerable – at least for investors. As a result, many market segments have posted positive double-digit performance since the beginning of the year. Energy shares have been particularly strong, although this sector was the weakest last month. Financials are also in high demand. Considerably weaker – albeit still positive – performance has been registered for consumer goods names such as food companies, the retail sector, and consumables manufacturers. These traditionally de-

10%

15%

Returns in EUR Source: Bloomberg Finance L.P., Raiffeisen KAG, 31 Dec 2020–30 Apr 2021; as of 30 Apr 2021

under way. In regional terms, there has been a noticeable shift in attitude among investors in recent months. In the initial weeks of the year, shares from the Emerging Markets led the pack by a significant margin. As time went on, however, the other regions bridged the gap again. The relative weakness of the Emerging Markets continued in April, so these markets are now among the stragglers.

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Market conditions Commodities and currencies: Industrial metals on the rise 2.7%

GBP

2.5%

CNY

1.6%

USD

0.1%

RUB

-1.5%

CHF

-2.9%

BRL

-4.0%

JPY

-4%

-3%

-2%

-1%

0%

1%

2%

27.7%

Energy

18.9%

Industrial metals

-4.5% -5%

3%

Precious metals 0%

5%

10%

15%

20%

Commodities turned in very strong performance in April. Prices rose in all three main groups – industrial metals, precious metals, and energy. Industrial metals have seen the strongest development of late. The most important commodities in this segment are copper and aluminium, which are benefiting from the economic recovery as well as various climate protection measures. In addition, the production does not appear to be fully meeting the demand at the moment, which is also contributing to the rising prices. Developments on the foreign exchange market were characterised by a broadly based appreciation of the euro in April. The common currency strengthened against G7 currencies (e.g. the US dollar and pound) as well as Emerging Market currencies (e.g. the Indian rupee and Turkish lira). The strength against the US dollar seen in the previous months partially reversed again. However, the greenback still has a slight edge in year-to-date terms

25%

Returns in EUR Source: Bloomberg Finance L.P., Raiffeisen KAG, 31 Dec 2020–30 Apr 2021; as of 30 Apr 2021

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Outlook Global economic situation – GDP 2020–2021

Russia

4.1% 2020

6.3% 2020

2021

USA

2021

Eurozone

8.5% 2.3%

-6.8%

2020

-3.5%

2021

3.0% 2020

-3.5%

3.4% 2020

2021

Brazil

10.5%

India

5.8% 2020

2021

-5.1%

Africa

-3.4%

-4.5%

Source: Bloomberg Finance L.P., as of: 30 April 2021

2021

Japan 2020

China

3.3% 2020

2021

2020

2021

-7.4% World

-3.8% marketview ⅼ May 2021 ⅼ 7

2.9% 2021


Outlook Global economy: USA as driver of worldwide economic development 1200

100 90

1000

80

US real estate market

70

800

60 600

50 40

400

30 20

200

10 0

2010 New home sales (1000) NAHB Housing Market Index (rhs)

2021

0

83 1021

The economic data in the USA are still on a very good trajectory, and the majority of surprises are still positive. The performance of the US real estate market is particularly impressive, considering that it has not only left the coronavirus crisis far behind it but is also posting ten-year highs for new residential construction and new home sales. This trend can likely be attributed to the attractive financing conditions for real estate, and to the rapid return to fundamental optimism among the American population. As a result, a solid economic recovery is expected for the USA this year, with growth rates of over 6%. As usual, the Eurozone is lagging behind a bit here, with real economic growth expected to come in closer to 4% in these

parts. Nevertheless, there is plenty of reason for optimism regarding the domestic economy, particularly since the purchasing managers’ index for the services sector recently showed a surprising surge and crossed the important threshold of 50. Not least because of the acceleration in the vaccination of the population, a brisk economic recovery is realistic in the second half of the year.

Source: Bloomberg Finance L.P., Raiffeisen KAG

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Outlook Money and capital market: Inflation drawing attention 3.0

Inflation expectations for USA and Germany

2.5

2.37

2.0

1.5

1.32

long-term trend or a temporary phenomenon will likely be one of the most relevant questions in the coming

1.0

months. After all, a lasting rise in inflation would likely be a negative factor for many market segments.

0.5

0.0

Just as we appear to be getting the pandemic slowly under control thanks to a significant acceleration in vaccinations, the next problem comes knocking: inflation. In recent years, it has been much too low – at least in the opinion of the central banks. This was and continues to be the core argument for the zero and negative interest rate policies. Now, a reversal may be looming in this regard. Inflation expectations have been on the rise on both sides of the Atlantic for several months now. Realised inflation has also been approaching 3% in the USA and 2% in the Eurozone recently. Whether this is a

2009

2021

Inflation expectations for USA Inflation expectations for Germany

Source: Bloomberg Finance L.P., Raiffeisen KAG

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Outlook Government and corporate bonds: Further yield increases likely 4.5 4.0

Yields in USA and Germany

3.5 3.0 2.5 2.0

1.74

1.5

Spreads for euro issuers outside of the financial sector are now at only about 0.8%. From a historical

1.0 0.5 0.0

-0.29

-0.5 0.0

The recent stabilisation on the government bond markets is likely to be short-lived. The signs are pointing to further yield increases. This is supported by the ongoing economic recovery and the rising inflation expectations. In addition, the discussion about reducing the bond purchases will likely begin later in the year, at least in the USA. Overall, it is likely that yields of over 2% will be seen for ten-year Treasuries this year and yields above zero for their German counterparts. Corporate bonds are still in demand, which continues to put downward pressure on spreads in this segment.

2009 Yield on 10-year US bonds Yield on 10-year German bonds

2021

perspective, there has only ever been a brief phase – at the beginning of 2018 – with lower spreads. Nevertheless, corporate bonds continue to provide a way to avoid negative yields in the bond segment and will thus remain well supported.

Source: Bloomberg Finance L.P., Raiffeisen KAG

marketview ⅼ May 2021 ⅼ 10


Outlook Equities unperturbed by rising yields 20%

Year-to-date performance of global sectors

15%

10%

MSCI World Energy Sector

MSCI World Materials Sec

MSCI World Industrials L

MSCI World Consumer Disc

MSCI World Consumer Stap

MSCI World Health Care L

MSCI World Financials Lo

MSCI World Information T

MSCI WRLD/COMM SVC

0%

MSCI World Utilities Sec

5%

The outlook for the equity market remains positive. This is primarily due to the strong fundamental data, as the data and information for both economic development and corporate earnings offer a consistently positive picture. The exaggerated optimism being shown by many market participants does call for caution. Inflation could also undermine the positive development in the coming months. In the equities segment, cyclical assets will likely deliver better performance. As such, the trend seen at the beginning of the year may resume. Based on these expectations, the European equity market is attractive thanks to the high weighting of cyclical names.

Source: Bloomberg Finance L.P., Raiffeisen KAG

marketview ⅼ May 2021 ⅼ 11


Outlook Emerging Markets: Potential not fully tapped 8.0

7.0

6.0

5.29

5.0

4.99

4.0

3.0

but would likely be somewhere between 2% and 4% – in other words, in the same range offered by US cor-

Yields on EM bonds

2.0

1.0

0.0

2009

Emerging Market investments showed mixed development in the initial months of the year. Looking at equities and bonds over the entire period, however, the performance is disappointing on the whole. This is due in part to higher-order factors, such as the strong dollar and higher US yields. Such developments do not favour the Emerging Markets. As always, however, there are also country-specific aspects that are damaging the sentiment for this asset class. But, ultimately, it is these factors that lead to higher yields. If everything were secure and stable, hardcurrency bonds would not have yields of around 5%,

2021

porate bonds of various quality. The higher yield goes to those who at least endure the phases of stress and weakness or – in the best-case scenario – use them to make purchases.

Yield on EM hard-currency bonds Yield on EM local-currency bonds

Source: Bloomberg Finance L.P., Raiffeisen KAG

marketview ⅼ May 2021 ⅼ 12


Strategic Asset Allocation The Strategic Asset Allocation refers to the assessment of the various asset classes over a long-term horizon.

Equities

less attractive

Government bonds

attractive

We slightly reduced the equities allocation (from around 27% to 26%) in Q4 2020 and are thus positioned neutrally in terms of the risk contribution. However,

this also reflects a distinct country assessment: We have exclusively held positions in value equities in the USA since December. Aside from this, we prefer “more cyclical markets” like in Europe, Japan, and the Emerging Markets.

less attractive

attractive

Yields on the European government bond markets are at extremely low levels. Over a five-year horizon, we expect low returns on these markets (or even negative returns in some cases). We still have positions in noneuro government bonds and used the recent yield increase (e.g. to roughly 2% for Australian ten-year bonds) to prudently expand our holdings.

Corporate and EM bonds

less attractive

attractive

Spreads on corporate bonds have narrowed considerably. In the case of the European high yield market, they have retreated to 3.15%, and are thus in the most expensive quintile since 1998. We are using this as an opportunity to take the profits on high yield bonds and to close the position. We are still holding investment grade corporate bonds, corporate bonds in EM currencies, and EM hardcurrency bonds.

Real assets

less attractive

attractive

We used the strong performance of inflation-sensitive assets (duration-hedged inflation protection bonds, cyclical materials, inflationsensitive shares and currencies) in the first quarter to reduce this position. Nevertheless, we believe this segment to be attractive over the longer term and still hold substantial and key positions here.

*all statements refer to the SAA of the funds Raiffeisen 337 – Strategic Allocation Master and Raiffeisen-GlobalAllocation-StrategiesPlus. Source: Raiffeisen KAG; this forecast/estimate is no reliable inference to the future performance.

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Tactical Asset Allocation Mai The Tactical Asset Allocation steers marketoriented mixed funds such as the Raiffeisen strategy funds over the short to medium term. The positioning of the fund management can differ from that of other capital market analysts (e.g. Raiffeisen RESEARCH GmbH).

Neutral weighting ■

Economy: economic data and particularly leading indicators remain strong; services sector in the Eurozone has also started to recover recently Corporate earnings: earnings season for the first quarter proceeding positively; outlook for the coming months and quarters promising  entiment and technical indicators: investors S somewhat too optimistic; uptrend continues; individual indicators point to overheating in the short term Special topics: liquidity from central banks continues to provide support; inflation worries and tax hikes could dampen development Positioning: equities still overweighted versus euro government bonds; commodities overweighted versus money market

Equity weighting

Maximum underweighting

±0 vs. previous month

Maximum overweighting

This forecast/assessment is not a reliable indication of future performance.

marketview ⅼ May 2021 ⅼ 14


Indicators Overview of market development Equity indices

30.4.2021

Diff. YTD

Diff. YTD

5 years p.a.

in local currency

in euro

in euro

Bond yields

30.4.2021

Diff. YTD

10Y. in %

in BP

MSCI World

2,939

10.4%

11.6%

12.9%

USA

1.63

71

Dow Jones

33,875

11.3%

13.1%

15.3%

Japan

0.10

8

Nasdaq 100

13,861

7.8%

9.5%

26.2%

UK

0.84

65

3,975

12.7%

12.7%

8.3%

Germany

-0.20

37

DAX

15,136

10.3%

10.3%

8.6%

Austria

0.03

45

ATX

3,227

16.7%

16.7%

9.8%

Switzerland

-0.20

35

Nikkei

28,813

5.7%

1.5%

12.1%

Italy

0.90

36

Hang Seng

28,725

5.9%

7.4%

9.1%

France

0.16

49

1,348

5.6%

6.6%

11.4%

Spain

0.48

43

Euro Stoxx 50

MSCI EM Exchange rates

Money market rates

EUR/USD

1.20

1.6%

-1.0%

USA

EUR/JPY

131.41

-4.0%

-1.5%

Euro zone

EUR/GBP

0.87

2.7%

-2.1%

UK

EUR/CHF

1.10

-1.5%

0.0%

EUR/RUB

90.51

0.1%

EUR/CNY

7.78

2.5%

0.18

-6

-0.54

1

0.08

6

Switzerland

-0.75

2

-3.8%

Japan

-0.09

0

-1.0%

Key rates of central banks

in %

USA - Fed

0.25

0

Eurozone - EZB

0.00

0

0.10

0

Commodities

Gold Silver Copper Crude oil

3M. in %

1,769

-6.8%

-5.3%

9.4%

26

-1.8%

-0.2%

10.7%

UK - BOE

9,829

26.8%

28.9%

17.3%

Switzerland - SNB

-0.75

0

67

30.0%

32.1%

10.4%

Japan - BOJ

-0.10

0

Source: Bloomberg Finance L.P., 30 April 2021, YTD = change compared to previous year-end; past performance is not a reliable indicator for future development.

marketview ⅼ May 2021 ⅼ 15


Disclaimer This document was prepared and edited by Raiffeisen Kapitalanlage-Gesellschaft m.b.H., Vienna, Austria (“Raiffeisen Capital Management” or “Raiffeisen KAG”). Despite careful research, the statements contained herein are intended as non-binding information for our customers and are based on the knowledge of the staff responsible for preparing these materials as of the time of preparation and are subject to change by Raiffeisen KAG at any time without further notice. Raiffeisen KAG assumes no liability whatsoever in relation to this document or verbal presentations based on such, in particular with regard to the timeliness, accuracy, or completeness of the information presented and the sources of information, or in respect of the accuracy of the forecasts presented herein. Similarly, any forecasts or simulations of earlier fund performance presented in this document do not provide a reliable indication of future performance. Furthermore, investors with a home currency different than the currency of the fund or portfolio should note that returns can also rise or fall due to currency fluctuations. This document is neither an offer, nor a recommendation to buy or sell, nor an investment analysis. It is not intended for use in lieu of individual investment advice or other consultation. If you are interested in a specific product, along with your bank advisor, we will be happy to provide you with the prospectus and the information for investors pursuant

to § 21 AIFMG, prior to purchase. All specific investments should be made following a consultation and discussion, and after having reviewed the prospectus and the information for investors pursuant to § 21 AIFMG. It is expressly noted that securities transactions can involve significant risks and that taxation of such depends on personal circumstances and is subject to change in the future.The performance of investment funds is calculated by Raiffeisen KAG and that of real estate investment funds by Raiffeisen Immobilien Kapitalanlage GmbH pursuant to the OeKB method, based on the data from the depository bank (in the event that payment of the redemption price is suspended, available indicative values are used). Individual costs, in particular the issue premium, any applicable

return fee, and taxes, are not taken into account in calculating performance. Depending on the specific amount, these costs reduce the actual performance accordingly. The maximum amount of the issue premium and any applicable return fee can be found in the key investor document (key investor information) or the simplified prospectus (real estate investment funds). The performance of investment funds is calculated by Raiffeisen KAG and that of real estate investment funds by Raiffeisen Immobilien Kapitalanlage GmbH pursuant to the OeKB method, based on the data from the depository bank (in the event that payment of the redemption price is suspended, available indicative values are used). Individual costs, in particular the issue premium, any applicable return fee, and taxes, are not taken into account in calculating performance. Depending on the specific amount, these costs reduce the actual performance accordingly. The maximum amount of the issue premium and any applicable return fee can be found in the key investor document (key investor information) or the simplified prospectus (real estate investment funds). The performance of portfolios is calculated by Raiffeisen KAG in time-weighted terms (timeweighted return, TWR) or in money-weighted terms (money-weighted return, MWR) [refer to the presentation section for details] based on the last known market price or foreign exchange rate or information available via securities information systems. Past performance is not a reliable indicator of the future performance of an investment fund or portfolio. Performance is expressed in per cent (without fees) assuming the reinvestment of all dividends. The published prospectuses, information for investors pursuant to § 21 AIFMG, and customer information documents (key investor information) for the investment funds of Raiffeisen Kapitalanlage-Gesellschaft m.b.H. are available in German at www.rcm.at or, if the fund shares are sold abroad, in English (if applicable in German) or in your national language at www.rcm-international.com. The published prospectus for the real estate fund described in this document is available in German at www.rcm.at.

Imprint: Reproduction of the information or data, in particular the use of texts, text sections, or graphic material from this document, requires the prior written consent of Raiffeisen KAG.

Media owner: Zentrale Raiffeisenwerbung Publisher, produced by: Raiffeisen Kapitalanlage-Gesellschaft m.b.H., Mooslackengasse 12, 1190 Vienna

marketview ⅼ May 2021 ⅼ 16


Contact

Raiffeisen Capital Management is the umbrella brand for: Raiffeisen Kapitalanlage GmbH Raiffeisen Immobilien Kapitalanlage GmbH Raiffeisen Salzburg Invest GmbH Mooslackengasse 12 1190 Vienna, Austria Photo: David Sailer

t ⅼ +43 1 711 70-0 f ⅼ +43 1 711 70-761092 e ⅼ info@rcm.at w ⅼ www.rcm.at www.rcm-international.com

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marketview ⅼ May 2021 ⅼ 17

Profile for Raiffeisen Capital Management

market view of Raiffeisen Capital Management, May 2021  

market view: Fast and compact overview of international capital markets from the perspective of Raiffeisen KAG

market view of Raiffeisen Capital Management, May 2021  

market view: Fast and compact overview of international capital markets from the perspective of Raiffeisen KAG

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