Economic Situation & strategy
June 23, 2022

Frankfurt, New York, Tokyo, ...: We have a problem

High inflation rates, a more restrictive monetary policy, rising interest rates, the war in Europe and corona lockdowns in China are taking their toll this year. In these times, investors need nerves of steel - and patience, because a quick turnaround for the better is not yet in sight. The MSCI World Equity Index is now more than 20 percent down since the beginning of the year, and the MSCI World SRI Index, which tracks particularly sustainable companies, has even lost almost 25 percent in value. The stock markets are currently under pressure from two sides: higher interest rates due to a more restrictive monetary policy lead to lower valuation multiples, and the weakening economy puts pressure on profit expectations - a perfect storm.

Despite the already large losses in the equity markets, we continue to advise caution at the moment. The DAX is likely to tackle its low for the year at 12,400 points again in the foreseeable future. Should this level not hold, the book value at just under 10,000 points represents the decisive catch-up line in the worst-case scenario. This line held as a lower limit in the two major downturns in 2002 and 2008, at which point at the latest one must increase the equity ratio again. Since one will only catch the lower turning point with luck anyway, one should also hold a basic portfolio of shares with little dependence on the economy and good pricing power in this market phase.

Moreover, the following also applies in this difficult market phase: In the long term, the upward trend dominates on the stock markets. So far, all price losses incurred in times of crisis have been recovered and investors have been compensated for going through a valley of tears.