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Soft Growth Patch and US Rate Rise Concerns Hit Cyclical Assets
Soft Growth Patch and US Rate Rise Concerns Hit Cyclical Assets ETFS Multi-Asset Weekly Soft Growth Patch and US Rate Rise Concerns Hit Cyclical Assets
Highlights
- Cocoa climbs to a 3-year high on Ebola virus concerns.
- Equity markets hit resistance near all-time highs.
- US dollar continues to strengthen as Fed signals policy normalisation.
Concerns about China’s growth outlook, stagnation in Europe and expectations of higher US interest rates put pressure on cyclical assets last week. Small cap and resource-linked equities were hit, a broad range of growth and interest rate sensitive commodities came under pressure as the US dollar moved higher. With China growth disappointing and Europe showing few signs of benefiting from recent ECB stimulus, markets appear on edge, particularly with expectations growing that US interest rates will start rising in H1 2015. In our view China growth will rebound later this year as government stimulus takes hold and the US recovery will help support global growth. Potential US rate increases and a strong dollar are a reflection of improving underlying US fundamentals and ultimately that improvement should benefit many cyclical assets. Commodities, in our view, have particularly strong rebound potential given their underperformance in recent years and many now trading at or below the marginal cost of production.
Commodities
Cocoa climbs to a 3-year high on Ebola virus concerns. Fears the Ebola virus may spread to the Ivory Coast, cocoa’s biggest producer, prompted a 5.4% gain in cocoa prices last week. With bordering Liberia and Guinea already plagued by the disease, there are concerns it is only a matter of time before the virus reaches the country. At the same time, the sugar price fell by 4.5% last week as the Brazilian cane harvest continued to progress well and monsoon rains in India have been steadily catching-up after a delayed start. Sugar is likely to remain under pressure in the near term as supply expectations for Brazil and India (together accounting for close to 40% of global output), remain abundant. The wheat price also continued to slide last week, dropping to a 4-year low. However, with wheat priced for perfect growing conditions, any small setback in weather could drive a price rally.
Equities
Equity markets hit resistance near all-time highs. With the exception of Germany, European equity benchmarks ended the week flat and the EURO STOXX 50® Investable Volatility Index dropped 7.8% over the past week, back near its all-time low. While a better-than-expected ZEW survey provided a boost to the LevDAX® x2 Index, up 2.1%, the decision of the Scots to remain part of the United Kingdom in their Independence vote last week will likely support UK equities in the coming week. Meanwhile, the underperformance of the Russell 2000® Index, which covers small cap US stocks, and the S&P 500 continues, indicating that investors continue to favour blue chip over riskier stocks as US equities hover near all-time highs.
Currencies
US dollar continues to strengthen as Fed signals policy normalisation. The US Federal Reserve has just taken the first step towards raising rates: announcing an end to its QE programme at its forthcoming meeting. We expect the US Dollar to remain supported, with the Fed signalling higher rates in 2015. The Fed’s last tightening cycle lasted from 2004 to 2006, when rates rose by 5 percentage points. While the UK remains united, we view the GBP rebound following the Scottish referendum as an opportunity to add to short GBP positions. The UK’s North-South economic divide is likely to cause policymakers headaches and has the potential to postpone rate rises and weigh on GBP. Eurozone banks failed to take advantage of the unlimited funds on offer from the ECB, taking up just €83bn of the ECB’s long-term refinancing funds. The ECB’s goal of significant balance sheet growth could be harder to achieve than expected and could prolong the depressed price environment
Important Information
This communication has been issued and approved for the purpose of section 21 of the Financial Services and Markets Act 2000 by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (”FCA”).
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Disclaimer
The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.
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Mar.25 crypto update, Research commentary on market turmoil, CIO Notes and ETP performance attribution
A – Research commentaries from last week developments
- Markets reacted to Trump tariffs – Bitcoin stands
Global markets fell sharply after President Trump’s new 25% tariffs on Chinese imports. Stocks led the decline – the Nasdaq 100 is now down -14% since the election, and the S&P 500 -12.3%. Crypto reacted too, but not uniformly:
• Altcoins such as SOL and ETH were hit hardest (down over 30% since November)
• Bitcoin and the Nasdaq Crypto Index (NCI) showed resilience, gaining +14.3% and +9.3%, respectively since Election
This kind of selloff tends to erase diversification — everything moves together. But it’s essential to take a longer view:
• Since Trump’s election, only three assets have consistently outperformed: Bitcoin, NCI, and gold.
• Last week, only gold outpaced BTC, confirming the role of digital assets as a strategic long-term allocation — even in volatile regimes.
- Regulatory tailwinds are building
The next phase of crypto decoupling could come from policy. In the US, the signals are turning positive:
• The STABLE Act advanced in Congress, with Trump urging swift approval
• A tokenized fund paid $4.17M in dividends last month, proving blockchain’s real-world income potential
• The SEC has launched a review of past crypto guidance — a move toward clearer rules and broader institutional comfort
Bottom line: In a week where most assets fell, crypto stood out. That’s not a coincidence — it’s a signal.
B – CIO Monthly Notes – Crypto’s Political Tailwinds Are Blowing Hard
• Following a week in Washington, our CIO outlines how crypto is gaining bipartisan traction in DC.
• Key takeaway: regulatory clarity is coming faster than expected, and institutions are taking note.
C – March 2025 ETP performance overview
As of 31/03/25 – Source: Hashdex and Bloomberg. Performances in USD.
Hashdex Nasdaq Crypto Index ETP (HASH / HDX1) : March: -4.5% | YTD: -19%
Key drivers in March: Bitcoin and Ethereum
March Performance Attribution:
Hashdex Crypto Momentum Factor ETP (HAMO / HDXM): March: -8.5% | YTD: -22%
Key drivers in March: Litecoin, Ethereum and Solana
March Performance Attribution:
Hashdex Multi-Crypto Index ETPs
Hashdex Nasdaq Crypto Index ETP (HASH)
• Broad exposure to BTC, ETH, and major altcoins (SOL, XRP, ADA, etc)
• Quarterly rebalancing – evolutive, market cap-based allocation with no caps (weights and number of constituents)
• Largest crypto index ETP in Europe (+$300m AUM)
• ISIN: CH1184151731 | Tickers: HASH (SIX, Euronext) / HDX1 (Xetra)
• Tradable in USD, EUR, CHF, GBP
• Factsheet / Product page / Index Methodology
Hashdex Crypto Momentum Factor ETP (HAMO/HDXM )
• Momentum-based strategy with monthly rebalancing
• Designed to capture trends across large-cap crypto assets
• ISIN: CH1218734544 | Tickers: HAMO (SIX, Euronext) / HDXM (Xetra)
• Tradable in USD, EUR, CHF, GBP
• Factsheet / Product page / Index Methodology
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