The view of the stock markets is currently very unpleasant. “We are experiencing an accumulation of various trouble spots,” says Christian Röhl in an interview with ntv.de. The investor believes further setbacks are possible. For savings plan investors, however, he has good news.
ntv.de: War in Ukraine, lockdowns in China, recession worries, interest rates are rising – the stock markets have been falling steeply for weeks. Is the bottom in sight?
Christian Röhl: Nobody knows. We are not only experiencing one crisis, but an accumulation of various trouble spots that are related to one another. A positive catalyst is missing. It was different in the Corona crisis. You knew then that a vaccine was being worked on. And one hoped: As soon as this vaccine is there, everything will be better. Such a catalyst is currently not available. Raising interest rates is not enough to make inflation disappear quickly. There is no end in sight to the war in Ukraine. So we see no ground, but a smoke screen.
That sounds unpleasant. What are the chances of this fog clearing?
We’ll be a little smarter once the companies have presented the figures for the past third quarter. The consumer mood determined in surveys has been record-breakingly bad for months. Nevertheless, many companies presented decent figures for the first half of the year. We will soon see whether and how the bad mood is reflected in the numbers. But there will be no clear answer. We will see declining results from industrial groups, which are increasingly struggling with high energy costs. BASF has already given a foretaste. The situation is different for companies that can push through higher prices with consumers – for example the luxury goods manufacturer LVMH or Pepsi.
One of the main reasons for the downturn on the stock markets is the turnaround in interest rates initiated by the central banks. Both the US Fed and the ECB appear determined to raise interest rates further this year. When will you stop doing this?
Only when inflation falls significantly and sustainably. Some observers are arguing that the Fed will soon shy away from further interest rate hikes because the risks of a recession are increasing. I think you should be careful not to get too optimistic here. The Fed has made it clear that it is willing to risk a recession if it serves monetary stability.
How should investors react? Eyes shut and go for it?
It depends on how investors are invested and with what time horizon. Anyone who regularly saves money – and at the moment one has to say: Those who can save money despite rising energy and living costs – should simply pull through their boots and continue to save their hopefully cheap and broadly diversified funds, such as the classic savings plan on the MSCI Word. This should definitely be continued, especially by young and middle-aged people who still have a few decades to reach their savings goals. A phase in which prices are sagging is good for them. You get more savings plan shares for the same money and then benefit accordingly when things start to pick up again. And eventually that will happen.
And if you belong to the elderly?
If you already have assets and are heading towards retirement or are already retired, you should make sure that your assets are widely diversified. Of course, equity investments are part of it and you can also selectively top up there. But now is not the time to mobilize all cash reserves to go “all in” in the stock market. This would require significantly lower ratings or clear technical signals and I don’t see either of these in general.
If you want to buy now: Is it a good idea to focus on individual sectors or perhaps on shares in companies that pay high dividends?
We all don’t know what’s happening. Against this background, it is advisable to invest as widely as possible – in different countries, different sectors – and not to form a cluster of opinions and chase any trend. There are good arguments for investing in energy sources. Both in oil, if you can reconcile that with your own sustainability standards, and in green electricity producers. But that doesn’t mean putting all your money there. Spread is very important. Especially in these times when we don’t know what other risks will suddenly pop up. Investors with a broadly invested, actively managed fund or an ETF are well served. You can also conclude savings plans for individual shares with so-called neo-brokers. However, it is then important not to save just a few shares. The same applies here: Spread it widely, never regret it.
Are bonds a good complement?
Interest rates are attractive for bonds, especially in the USA. Two-year government bonds yield around four percent. That sounds pretty nice. But there is a currency risk here. Currently the dollar is strong and the euro is weak. But trends can also reverse. You get a fixed rate of return on bonds. But it will not be more than this fixed yield. I have no chance of earning more to escape inflation.
What do you think of bond etfs?
They are a strategic element for a depot. But you should be clear about what you are betting on with this element, especially with long maturities: on interest rates not continuing to rise at the current rate. And if you own foreign currency bonds, you’re betting that the euro won’t strengthen significantly.
And cryptocurrencies?
Cryptocurrencies – I prefer the term “digital assets” – are an exciting asset class that is just emerging. If you see potential here and want to feed your curiosity about technological developments with money, you can of course add something. But beware of overly simplistic narratives like “Bitcoin protects against inflation”. We can see right now that just because something is limited does not automatically mean that the price will remain stable.
Jan Ganger spoke to Christian Röhl
