Polis

• Demographics will have an inflation-increasing effect in the longer term. The reason for this is the decades-long decline in the workforce in industrialized countries. Corresponding wage increases will be significantly higher than in recent decades.
• In addition, financing the growing elderly population requires more government debt. Due to the high level of debt, governments are no longer able to combat inflation in the same way as was possible in the 1970s.
• The issue of deglobalization is also likely to be with us for many years to come. We need more suppliers - and no longer just the "cheapest". This realization already came during the Covid pandemic and now increasingly due to the war in Ukraine.
• Large companies in Europe and the USA in particular are currently finding it easy to pass on rising costs to consumers. A significant proportion of inflation is therefore due to the fact that companies are raising their prices - even more than their costs are rising. However, this effect will soon diminish somewhat.
• The development of energy prices in recent months has been very positive: the Gas Future and the Container Freight Cost Index have fallen by almost 80 % since their peak values.
• The Chinese economy is also slowly recovering, which should ease the supply chain problem in the medium term

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Development

• Gas prices in Europe rose sharply in late summer, only to fall again just as sharply afterwards. This means that the German stock market has underperformed the US stock market by 30% since the end of 2020 - until the gas price peaked in August last year.
• Since the gas future fell sharply, the stock market has also performed over 15 % better again.
• The situation is similar with the dollar exchange rate. Since the price of gas has fallen again, the dollar has also fallen from 0.96 at its peak to 1.09.
• Another development: the high inflation rates have led to an inverse interest rate structure in several countries. In the USA, this is a relatively reliable early indicator of a recession.
• In Europe, this indicator is the development of the real money supply, which is currently shrinking by 7% in the eurozone (more than ever before).
• We have investigated how relevant these economic forecasts are: In the ten cases where a particularly high probability of recession has been forecast to date, over the last 53 years, there have been none.
• In the stock market, too, there is no correlation between the forecasts of stock strategists and the subsequent price performance. However, there are other factors that can be used to make forecasts. One is consumer pessimism and the other is the behavior of equity professionals.

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Investments

• Although we all read about falling real estate prices, our chief investment strategist considers average residential properties to be relatively stable (assuming they are energy-efficiently renovated or new properties). The observable rise in rents and growing demand for rental apartments, for example, speaks against a fall in value, even though new construction activity has already shrunk in the last year.
• Although not quite as good as residential real estate, gold offers good crisis protection for German investors. In the ten recessions in which residential real estate has not fallen once, the price of gold has fallen three times and risen seven times.
• In times of crisis, all three important economic entities - private households, companies and the state - show astonishing flexibility. Corporate profits in America, Europe and the Far Eastern industrialized countries have risen despite war, the coronavirus crisis, rising interest rates and inflation.
• In all relevant equity sectors, we have earnings expectations for the next 10 years that are well above 5% worldwide. In the cyclical, cyclical areas of the stock market, prices now also appear to be on the rise.
• Two sectors are particularly interesting here: firstly, the healthcare sector - earnings expectations are practically as high as they were two years ago, as profits have risen just as sharply as share prices.
• The IT sector has recently been added to the list. Now that company earnings in this sector have also continued to rise significantly, but share prices have fallen by 49% in the meantime, the valuation in this area has become so favorable that IT companies can also perform in the next 10 years.

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Plateau:

• Safe investments can still be forgotten; normal bonds will probably not generate any real returns in the next few years either.
• Estimate for a solid portfolio over the next 10 years: invest 2/3 of wealth in entrepreneurial investments - i.e. shares and private equity funds, 20 % German, energy-efficient residential real estate (no luxury apartments), 10 % gold and 5 % secured bonds.
• One - still relatively weak - ray of hope in Germany is the equity-based pension, although significantly higher sums than the 10 billion estimated so far are needed to stabilize pension insurance contributions.

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