Dear Clients, Friends and Partners of Das Family Office,

MEGA - Make Europe Great Again!

After a very good January, equity investors suffered losses in many market segments in February. This mainly affected our investment building blocks that invest in expensive technology stocks as well as high-quality growth companies. Shares in small to mid-sized companies were also affected. Additionally, Indian stocks, as well as equities from Taiwan, Korea, and Japan, saw declines. The latter tend to be categorized as part of the technology sector, as the indices of these countries are often dominated by technology stocks (e.g., Taiwan Semiconductor, Samsung Electronics, Tokyo Electron, Softbank, etc.).

If you look at the so-called factor indices, you will see that small companies (MSCI World Small Cap Index), quality companies (MSCI World Quality Index), and trend stocks (MSCI World Momentum Index) all suffered losses in February. Except for the MSCI World Small Cap Index, these indices are heavily dominated by technology stocks.

These developments highlight that the market rotation out of expensive technology stocks (Magnificent 7) is gaining momentum. We are not really surprised by this, as stock market valuations tend to mean-revert. That said, these very popular tech stocks have managed to maintain their high valuation levels significantly longer than many market participants would have expected.

In contrast to the poor performance of the mentioned factor indices in February, the MSCI World Value Factor Index, which invests in exceptionally inexpensive stocks (measured by low price-to-book and price-to-earnings ratios), recorded significant gains.

This was most evident in German, European, and Chinese equities, all of which had very low valuations and were therefore attractive buys.

We have been waiting a long time for the value factor to make a comeback, as—although it performs well in the long term—it has lagged far behind the broad market over the past two decades. It remains to be seen whether this is a sustainable shift in investor behavior or merely a short-lived rally, similar to what we saw in 2022.

In addition to the positive development of value strategies, we also observed attractive gains in dividend strategies, which started the year at comparatively low valuation levels.