Healthcare sector leads – technology and defense recover
International equity markets were mostly upbeat last week. Capital increasingly flowed into companies with more realistic fundamentals and attractive valuations, after previously only a few AI and semiconductor stocks had dominated equity market performance.
The healthcare sector in particular continued its relative strength and once again ranked among the most important performance drivers. Pharma, medical technology, and biotechnology companies benefited from their defensive earnings quality, persistently high innovation momentum, and rising demand for high-quality growth companies.
Within the technology sector, however, the picture was more differentiated. While software, IT, and selected platform companies saw renewed demand, many semiconductor and AI chip stocks saw profit-taking after their eccentric price rally in the first half of the year. This consolidation is primarily a consequence of previously sharply rising valuations and, so far, points more to a healthy market rotation. At the same time, defense stocks regained momentum after the correction of recent weeks. Likely also due to the upcoming NATO summit in Turkey.
UMBRELLA performance
The UMBRELLA Strategy benefited from strong performance in several core positions.
Bayer was among the biggest winners within the strategy last week. The key driver was the further improved assessment of the glyphosate litigation in the US. The US Supreme Court’s decision to take the case is interpreted by many market participants as an opportunity for greater legal certainty and a long-term limitation of future lawsuit risks. The stock also received additional tailwinds from the announced strategic reorganization of the Roundup business. The planned carve-out or structural separation of the business unit could better isolate legal risk, increase transparency, and sharpen the group’s focus on the higher-margin pharma and crop science activities. Against the backdrop of the still low valuation, this combination of declining legal risk, strategic realignment, and improved sentiment led to a significant re-rating of the stock.
Rheinmetall also recovered noticeably after the consolidation of recent weeks. The fundamental investment thesis remains intact. The company continues to benefit from a historically high order backlog, persistently rising demand for ammunition, air defense systems, and military vehicles, as well as the long-term growing defense budgets of NATO countries. Additional impulses are coming from Europe’s ongoing rearmament and numerous active procurement programs. With the stock’s recovery, these long-term growth drivers moved back into sharper focus for investors and supported the positive price performance.
In the technology sector, Apple and IBM were among the positive contributors of the week.
Apple benefited from the consistently high demand for high-quality technology stocks, as well as the expectation that investments in Artificial Intelligence and the growing service business could increasingly have a positive impact on earnings development.
IBM continued its recently improved development. The company continues to benefit from the increasing demand for hybrid cloud solutions, software, and AI applications in the enterprise environment. The presentation of a new NANO chip generation also brought additional momentum.
Johnson & Johnson once again confirmed its role as a defensive stability anchor. The broadly diversified business model, with a focus on innovative medicines and medical technology, delivers comparatively stable earnings even in more volatile market phases and helps reduce the overall strategy’s susceptibility to fluctuations.
NextEra Energy traded almost unchanged after being added to the strategy. Regardless of short-term price performance, we view the company as an attractive long-term building block within the UMBRELLA Strategy due to its leading position in renewable energy, its regulated grid business, and structurally rising electricity demand—especially from data centers and the build-out of AI infrastructure.
In the healthcare sector, Eli Lilly and Revolution Medicines were slightly weaker in the short term. In our view, this is largely normal profit-taking after the strong price performance of recent weeks and not a change in the fundamental investment thesis.
Eli Lilly continues to offer excellent growth prospects with its leading diabetes and obesity portfolio as well as a promising pipeline.
Revolution Medicines remains one of the most innovative companies in the field of targeted RAS cancer therapies. With several clinical programs against different KRAS mutations, we continue to see significant value creation potential, even though the share price naturally remains above-average volatile due to the early stage of development.
Tesla once again showed a high degree of volatility. The stock is currently reacting particularly sensitively to news on demand trends, increasing competitive pressure in the electric vehicle market, and the company’s ambitious valuation.
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Strategy positioning
With the addition of NextEra Energy, the focus on long-term structural growth trends was further expanded. As the world’s largest producer of renewable energy, the company provides access to the long-term themes of electrification, rising electricity demand, grid expansion, and the growing energy needs of AI data centers, while also improving portfolio diversification.
The UMBRELLA Strategy continues to focus on companies with strong competitive positions in healthcare, technology, industry, and infrastructure. The healthcare sector currently represents the largest weighting and is complemented by technology leaders as well as companies that could benefit from long-term structural growth trends.
Outlook
In the coming weeks, our focus will be on the start of the Q2 earnings season. Particular attention will be paid to companies’ outlooks for the second half of the year and expectations regarding revenue, earnings, and margin development.
After the recent improvement in market sentiment, convincing corporate results could further support the recovery. Change is, in any case, the only constant!
