Global household wealth fell last year for the first time since the financial crisis in 2008, as inflation and the appreciation of the US dollar wiped some $11.3 trillion off assets.
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Market development from our perspective – July 2023
Market development from our perspective – July 2023
Despite the most intensive monetary policy tightening measures of the last four decades, the global economy is showing remarkable resilience.
Global overview
The global economy remains robust despite the most intensive monetary policy tightening cycle in the last 40 years. Recession risks have fallen, although the economic slowdown continues. The prolonged economic cycle is continuing, with weak or negative growth expected in the coming quarters, followed by a moderate recovery.
Labour markets show sustained demand and low unemployment rates are strengthening consumer confidence. However, early economic indicators are clouding the outlook. Manufacturing industry continues to weaken, as does the previously strong service sector. Higher financing costs and stricter lending policies are slowing growth.
Overall inflation is now falling just as quickly as it previously rose. However, the target of 2% set by central banks may be questionable. Core inflation in particular remains high, and central banks may consider tightening monetary policy again after a pause.
The temporal variance of tightening cycles and effects forces central bankers to consider the fine line between necessary restrictions and potentially recession-inducing policies. The situation varies in different economic regions.
Eurozone
The Eurozone economy has shown astonishing resilience in the first six months of 2023, although the declining momentum described is confirmed. Weaknesses in the European economy are evident in low productivity, weak retail sales and the collapse of the manufacturing sector.
The property sector remains under heavy pressure and stricter lending standards are fundamentally hampering growth. Nevertheless, the stable labour market and the significant fall in inflation are positive factors. However, core inflation remains uncomfortably high despite rising wages. This situation presents the European Central Bank (ECB), which started tightening measures later than the US Federal Reserve, with the challenge of placing a heavy burden on the economy’s resilience in order to control inflation in the long term.
The United States of America
Contrary to expectations, the US economy did not contract in the first half of the year and the latest economic data has exceeded forecasts. Nevertheless, growth in the USA will decline, as early indicators point to a slowdown in future economic activity. Moderate growth is expected in the services sector, while the situation in manufacturing industry is stabilising. Despite this decline, there are currently no signs of an imminent recession.
The property sector remains weak, but house sales are currently recovering and industrial production may also have bottomed out. Full employment and the high number of job vacancies are boosting consumer confidence. Personal incomes remain stable and savings can be slowly built up again. The easing wage pressure indicates that the Federal Reserve (Fed) has made concrete progress in reducing aggregate demand and curbing inflationary pressure.
The current inflation data is encouraging, but Fed Chairman Jerome Powell emphasises that it is too early to declare victory in the fight against inflation. The question of whether the rate hike in July will be the last in the current cycle depends heavily on the data, as indicated by the central bank. So far, the Fed has kept inflation in check by acting quickly and decisively, without causing a major economic slowdown. The prospects for a gentle economic slowdown are becoming increasingly realistic.
China
The latest economic figures from China are rather modest. The strong growth in the first quarter could not be maintained in the following months. The service sector, which contributed to the recovery after the pandemic, is now showing signs of weakness. Investments and imports are declining, the property sector is hampering growth and international demand remains weak.
The fact that the early indicators for manufacturing industry are showing signs of stabilisation, albeit with a declining trend, could be seen as an initial positive signal. We interpret the statements made by political representatives after the Politburo meeting in July as a second encouraging sign. The importance of targeted policy measures to restore private sector confidence, boost investment and support the property sector was emphasised. It is now vital that those words be followed by concrete steps to ensure a sustainable and stable recovery.
Disclaimer: This assessment is not an offer to buy or sell and does not constitute an invitation to buy or sell financial instruments or a personal recommendation (investment advice) in connection with financial instruments. Any general recommendations are an expression of the FI Group’s expectations based on current market conditions. The recommendations are therefore not based on fundamental analytical facts, and thus this assessment alone cannot form the basis for investment decisions. In connection with specific investments, the FI Group always recommends consulting specific advisors. The FI Group recommends that entrepreneurs seek individual advice on current market conditions.
Investments are associated with a risk of financial losses. Neither historical returns and price developments nor forecasts for the future can serve as a reliable indicator of future returns or price developments. The FI Group is not liable for any losses arising directly or indirectly from action taken solely on the basis of this assessment.
The information contained in this assessment is based on sources that the FI Group believes to be reliable. However, the FI Group accepts no liability for defects, including errors in the sources, printing errors or calculation errors or changed conditions.
Own cognitions
Market development from our perspective – June 2023
Market development from our perspective – June 2023
"De-risking" is the key
Since President Biden took office and especially since the start of the war in Ukraine, the trade conflict between China and the US has no longer been constantly in the media spotlight. Nevertheless, it is by no means settled – on the contrary.
"De-risking" for future-oriented technologies
At the summit in Hiroshima, the leading western industrialised nations (G7) declared that they wanted to protect advanced technologies that could pose a potential threat to their national security, without unduly restricting trade and investment.
This concept, known as “de-risking”, involves coordinated investment and export controls in order to defend the technological advantage of the EU and the USA over China.
Adjustment of export restrictions for security-critical goods and assessment of foreign investments with regard to national security are part of these efforts.
In addition, the possibility of a control procedure that applies to foreign investments in own companies (outbound investment screening) is being considered. However, there are doubts as to whether investment controls are the right instrument, and it is pointed out that European companies make the most foreign investments worldwide, which makes it difficult to filter potential security risks.
Technological expertise is reflected on the stock markets.
The attractiveness of technology stocks with AI potential is rising again on the stock markets, as the markets are not expecting any further interest rate hikes and are even speculating on interest rate cuts. As a result the technology sector is once again becoming the focus of attention.
In 2022 the technology sector as a whole suffered, as many companies are reliant on the hope of future profits and dividends. Repayment of invested money therefore often takes a long time, which plays an important role in equity experts’ valuation models, as they take future financial returns into account.
The “Big Four” (Apple, Microsoft, Alphabet (Google) and Amazon) are an exception, as they already generate high profits and sometimes offer positive returns, such as share buybacks at Apple.
Artificial intelligence (AI) exerts a fascination. Microsoft has caused a stir with the ChatGPT programme and its involvement in OpenAI, while Google has developed the text robot “Bard” and Amazon is planning AI customer advice. Apple is also expected to become active in this area, and it is precisely these heavyweights that lead the technology sector.
It is important to note that the performance of the “Big Four” is also crucial for index investors, as they have accounted for around 20% of the S&P 500 for years and influence the entire US market, which makes up around two-thirds of the MSCI World Index.
By contrast, an equally weighted calculation variant of the S&P 500 shows hardly any growth. Although the market as a whole is not so strong, the heavyweights are driving the share price. However, investors should also keep an eye on the risks, as Bank of America already sees a small AI bubble on the stock market and hopes of an imminent interest rate cut by the Fed contradict the statements of some central banks and the assessments of many economists.
Disclaimer: This assessment is not an offer to buy or sell and does not constitute an invitation to buy or sell financial instruments or a personal recommendation (investment advice) in connection with financial instruments. Any general recommendations are an expression of the FI Group’s expectations based on current market conditions. The recommendations are therefore not based on fundamental analytical facts, and thus this assessment alone cannot form the basis for investment decisions. In connection with specific investments, the FI Group always recommends consulting specific advisors. The FI Group recommends that entrepreneurs seek individual advice on current market conditions.
Investments are associated with a risk of financial losses. Neither historical returns and price developments nor forecasts for the future can serve as a reliable indicator of future returns or price developments. The FI Group is not liable for any losses arising directly or indirectly from action taken solely on the basis of this assessment.
The information contained in this assessment is based on sources that the FI Group believes to be reliable. However, the FI Group accepts no liability for defects, including errors in the sources, printing errors or calculation errors or changed conditions.
interesting news
SEC requests court order to temporarily freeze assets of Binance’s U.S. affiliate
The U.S. Securities and Exchange Commission on Tuesday asked a judge to grant a temporary restraining order to freeze assets tied to Binance.
Own cognitions
Market development from our perspective – May 2023
Market development from our perspective – May 2023
"Growth or value in times of inflation?"
The inflation rate in Germany was 7.4% in March 2023, compared to 8.7% in the previous months. The question is whether this is an indication that inflation will fall back to 2% to 3% in the medium term. Germany has had virtually no inflation since the mid-1990s. However, the question of inflation expectations is not only relevant for everyday spending, but also for the right investment strategy. Growth stocks were more successful in times of low inflation, while value stocks performed better in times of inflation. The question is whether this pattern will repeat itself.
Growth strategy
The growth strategy relates to entire sectors and companies with high growth momentum in emerging markets, such as digitalisation or high technology. The investor bets that the company’s future profits will rise rapidly, which justifies a higher share valuation. Investors can also generate profits with shares in companies which are still in the red. However, higher price fluctuations should be expected.
Value strategy
The value strategy aims to identify undervalued companies with stable earnings growth and a good market position. Investors look for value stocks which are undervalued compared to other companies. The value strategy requires expertise, experience and careful research in order to identify suitable companies. Value companies often pay a good, steady dividend, which can provide investors with an ongoing income. Warren Buffet has been successful with this strategy and still pursues it today.
Value or growth?
The growth strategy focuses on companies with high growth potential and justifies higher share valuations due to the expectation of rising profits. Value shares, on the other hand, look for undervalued companies with stable earnings growth and a good market position. Both strategies are justified in certain market phases, and companies can switch from “growth” to “value” and vice versa. In recent years, growth stocks have been more successful than value stocks due to low interest rates, strong business models and faster digitalisation as a result of the pandemic.
Current development in growth and value
There has been a rotation from growth to value stocks due to fears of inflation and interest rates, as well as actually higher interest rates. This has led to valuation adjustments, particularly in the Technology segment, caused by higher interest rates and the discounting effect. The accumulated excess of growth stocks in portfolios has been adjusted through reallocation, and the money has now flowed into value stocks, which are not yet too expensive and are usually not so highly indebted. Another option is to combine both approaches by investing in actively managed funds.
Disclaimer: This assessment is not an offer to buy or sell and does not constitute an invitation to buy or sell financial instruments or a personal recommendation (investment advice) in connection with financial instruments. Any general recommendations are an expression of the FI Group’s expectations based on current market conditions. The recommendations are therefore not based on fundamental analytical facts, and thus this assessment alone cannot form the basis for investment decisions. In connection with specific investments, the FI Group always recommends consulting specific advisors. The FI Group recommends that entrepreneurs seek individual advice on current market conditions.
Investments are associated with a risk of financial losses. Neither historical returns and price developments nor forecasts for the future can serve as a reliable indicator of future returns or price developments. The FI Group is not liable for any losses arising directly or indirectly from action taken solely on the basis of this assessment.
The information contained in this assessment is based on sources that the FI Group believes to be reliable. However, the FI Group accepts no liability for defects, including errors in the sources, printing errors or calculation errors or changed conditions.
Own cognitions
Market development from our perspective – April 2023
Market development from our perspective – April 2023
Banks and their risks
The current banking crisis is not only affecting a small bank in the USA, but also Credit Suisse, which traditionally stands for stability and security.
The rescue operation for Credit Suisse raises questions as to whether banks and state supervision have learnt from the 2008 financial crisis. Banking crises often arise due to a lack of equity to be provided for high-risk transactions.
The traditional banking business is subject to three main risks: market risks, liquidity risks and credit risks. Savings banks and cooperative banks in Germany have already written off €13.7 billion on bond portfolios in 2022 in order to minimise insolvency risks.
Since the 2008 financial crisis, the EU has made a number of changes to the banking sector in order to minimise the risk of payment defaults and make the financial system more crisis-proof. A European resolution mechanism for banks that can no longer be rescued is intended to mobilise shareholders and creditors to bear losses in the event of resolution.
Only as a last resort and under certain circumstances can the taxpayer be asked to foot the bill. However, the creation of a standardised European deposit guarantee scheme, which many economists consider to be of prime importance, has so far failed.
In Germany, there is now a maximum possible compensation amount of €5 million for private depositors and €50 million for other depositors in the event of a bank failure. Deposit protection only protects certain assets.
The German stock market rose in March; the yield on the 10-year German government bond was 2.31%. The oil price (Brent) was down -5.45% at the end of March, while the price of gold and silver rose. The euro depreciated against the Swiss franc, but gained against the US dollar.
Disclaimer: This assessment is not an offer to buy or sell and does not constitute an invitation to buy or sell financial instruments or a personal recommendation (investment advice) in connection with financial instruments. Any general recommendations are an expression of the FI Group’s expectations based on current market conditions. The recommendations are therefore not based on fundamental analytical facts, and thus this assessment alone cannot form the basis for investment decisions. In connection with specific investments, the FI Group always recommends consulting specific advisors. The FI Group recommends that entrepreneurs seek individual advice on current market conditions.
Investments are associated with a risk of financial losses. Neither historical returns and price developments nor forecasts for the future can serve as a reliable indicator of future returns or price developments. The FI Group is not liable for any losses arising directly or indirectly from action taken solely on the basis of this assessment.
The information contained in this assessment is based on sources that the FI Group believes to be reliable. However, the FI Group accepts no liability for defects, including errors in the sources, printing errors or calculation errors or changed conditions.
interesting news
The World’s Best Banks
Not that long ago, the most any bank did to curry customer confidence was slap the word “Trust” on their names.
Own cognitions
Market development from our perspective – March 2023
Market development from our perspective – March 2023
In March, the capital markets rose despite stress in the banking system, with quality in equities and bonds in demand.
Central banks intervened to avoid an insolvency crisis, but the impact of interest rate increases could lead to a deeper recession.
There seems to have been a shift in focus away from inflation and interest rate hikes and towards the subjects of system stability and interest rate cuts.
Modern economic cycles are often characterised by the Federal Reserve raising interest rates until something gives. The banking sector is affected in the current cycle, with three American regional banks and the major Swiss bank Credit Suisse becoming insolvent in March. For reasons of system stability they were placed under receivership, while the central banks provided coordinated liquidity to avoid a general loss of confidence. . Thanks to the rapid intervention, there does not appear to be a systemic crisis in which one insolvency triggers the next.
Therefore, high-quality companies with stable growth should be favoured, especially those with healthy balance sheets, high margins and stable earnings. Bonds have also become attractive again, as they offer a reasonable interest rate. Technology and communications sectors were ahead in March, while cyclical sectors and value stocks suffered significant losses. Timely positioning for quality is important now.
Disclaimer: This assessment is not an offer to buy or sell and does not constitute an invitation to buy or sell financial instruments or a personal recommendation (investment advice) in connection with financial instruments. Any general recommendations are an expression of the FI Group’s expectations based on current market conditions. The recommendations are therefore not based on fundamental analytical facts, and thus this assessment alone cannot form the basis for investment decisions. In connection with specific investments, the FI Group always recommends consulting specific advisors. The FI Group recommends that entrepreneurs seek individual advice on current market conditions.
Investments are associated with a risk of financial losses. Neither historical returns and price developments nor forecasts for the future can serve as a reliable indicator of future returns or price developments. The FI Group is not liable for any losses arising directly or indirectly from action taken solely on the basis of this assessment.
The information contained in this assessment is based on sources that the FI Group believes to be reliable. However, the FI Group accepts no liability for defects, including errors in the sources, printing errors or calculation errors or changed conditions.
interesting news
With Credit Suisse Crisis Under Control, SNB Raises Benchmark Rate
The Swiss National Bank said the crisis surrounding Credit Suisse has been halted. It raised its benchmark rate by another 50 basis points.
Own cognitions
Market development from our perspective – February 2023
Market development from our perspective – February 2023
The capital markets consolidated in February after a strong start to the year.
Despite rising interest rates and a pessimistic mood, quality and growth stocks even managed to gain ground, while outperformers from the previous year showed a weaker trend.
Bonds fell due to rising interest rates, but high-yield bonds held up better.
The stock markets reacted unusually to current issues, possibly due to positive company results and cautious optimism.
It is expected that profit decreases will only occur in the second half of the year. There is a possibility of an upstream price rally due to the stabilisation of interest rates.
. It is recommended to take advantage of countercyclical opportunities in the quality and growth segment, as these are ripe for a countermovement.
Disclaimer: This assessment is not an offer to buy or sell and does not constitute an invitation to buy or sell financial instruments or a personal recommendation (investment advice) in connection with financial instruments. Any general recommendations are an expression of the FI Group’s expectations based on current market conditions. The recommendations are therefore not based on fundamental analytical facts, and thus this assessment alone cannot form the basis for investment decisions. In connection with specific investments, the FI Group always recommends consulting specific advisors. The FI Group recommends that entrepreneurs seek individual advice on current market conditions.
Investments are associated with a risk of financial losses. Neither historical returns and price developments nor forecasts for the future can serve as a reliable indicator of future returns or price developments. The FI Group is not liable for any losses arising directly or indirectly from action taken solely on the basis of this assessment.
The information contained in this assessment is based on sources that the FI Group believes to be reliable. However, the FI Group accepts no liability for defects, including errors in the sources, printing errors or calculation errors or changed conditions.