Commentary, 17 of July 2024

After an outstanding first half-year for equity investors, the question for the next six months is whether things can continue in this vein. While there are clear signs of a bubble forming in the form of excessive price rises coupled with historically record-high P/E ratios, particularly for US large cap technology stocks, the significantly more favourable valuations of companies from other sectors give cause for optimism. As the price performance of most technology shares is essentially based on real substance in the form of sales and earnings growth, there is also justified hope that there may actually be positive spillover effects on companies from the rest of the economy. This is because as long as the economy does not fall into recession, the negative profit effects for company shares due to weaker economic activity are likely to be more than offset by positive valuation effects from expected interest rate cuts.​

Commentary, 27.04.2023
The good news first: Due to diminished correlations between bonds and equities, multi-asset portfolios finally offer substantial diversification advantages compared to single-variety portfolios. In addition, it is again possible to generate positive nominal returns with investments in money due on demand and in money market instruments.
However, this development also has its price, as more than a decade of extraordinarily expansive monetary policy has to be “normalized”. The main focus at the moment is therefore on the negative effects of an exceptionally rapid and extensive interest rate turnaround in the USA. While a rise in key interest rates of 475 basis points in just a little over twelve months made negative consequences for the real economy appear very likely, the extent of the instability of some US regional banks as a result still surprised some observers. Because although the liquidation of the Silicon Valley Bank (and Credit Suisse, as it were, as "collateral damage") seemed to have been digested, the First Republic Bank is another US bank that is currently in the focus of attention, whose possible restructuring leaves many more questions unanswered than expected.

Commentary, April 8, 2022
Hedging investment portfolios against the risk of a real loss of value has only played a minor role over the last two decades. In fact, until not too long ago, deflation, i.e. retreating consumer price indices, seemed the more imminent danger in this context. The more wrongfooted investors might have been in the face of the currently broad based price rises both for producers and consumers alike. In fact, the dynamic and heftiness might have even surprised professional investors, also from a long argued “temporariness” point of view of this relatively recent phenomenon. Yet even the last doubters of the seriousness of this topic might have surrendered in the face of consumer price rises of 7.5% p.a. in the Eurozone and 7.9% p.a. in the United States in March 2022.

Commentary December 30, 2021
By all respects, 2021 was an extraordinary year. Major western stock exchange indices skyrocketed without precedent, key cryptocurrencies – an investable asset class still strongly disputed by experts – exhibited spectacularly high volatility and resource prices, before all those for natural gas, multiplicated severalfold. Not surprisingly, monthly inflation rates marked values not seen for decades in the US, the UK and also in Europe.

All this came about amidst widespread new infections with the Covid-19 virus resulting in massive restrictions of public live and a related slowdown in economic activity. This had left little room for optimism at the beginning of the year, at least in the western world. Only hard-boiled optimists would have expected that the economy turned to the better that soon. Yet massive public rescue measures, combining ultra-loose monetary policy with massive fiscal stimulus measures, resulted in a successful stabilization of economic activity in most of the countries affected.