Polis

• Despite high pessimism levels of 34% in September 2022 and 44.7% in December of the same year, there was no recession in the following quarter. This shows the lack of correlation between quarterly surveys and the occurrence of a recession.
• Economic forecasts based on the consensus are considered worthless in the USA, but this does not stop many banks from basing their capital market forecasts on these often unreliable expectations.
• Surveys of equity strategists regarding the performance of the S&P index over the next twelve months have shown no demonstrable correlation between forecasts and actual results since 1991.
• Despite economic concerns, in particular the high level of new debt in the USA of over 9% on average from 2019 to 2023, there are positive indicators such as the fall in inflation from almost 6.0% to 3.4% and the expectation of a fall in interest rates in the USA in 2024.

Development

• The USA is facing a challenging situation with record high national debt and upcoming elections that could influence the stock market.
• Since 1982, US tax policy has shown an inconsistent development: while the national debt has risen, corporate and top tax rates have fallen.
• Large technology companies pay comparatively little tax compared to their profits, which contributes to further debt.
• Europe had a higher level of government debt in 2009 compared to the USA, but the increase since then has been less dramatic.
• The US equity market is particularly overvalued, similar to the Japanese market in 1981 and the global markets in 1999, despite generally attractive valuations compared to higher interest rates.
• Government bonds are not a real alternative to equities in Europe, Japan, Switzerland, France, Germany or Italy, as the yields on equities are significantly higher. The situation is different in the USA.

Investments

• Although the mood on the real estate market is poor, the general conditions are improving, which indicates that the timing is favorable.
• In residential real estate, several factors point to the improved situation: Interest rates have fallen by around 0.8% since peaking in October. In addition, wage increases are now well above the rate of inflation, enabling more people to pay higher rents.
• While new residential construction is declining due to numerous problems, real estate prices have been stagnating for several months and have fallen moderately, by around 10 %.
• Government bonds: Moderate price gains expected over the next few months, but a real loss of wealth is expected in the long term. Forecasts show that German government bonds are likely to suffer a real asset loss of around 33% between 2020 and 2030, with a loss in value of around 25% already having occurred by the end of 2023. Further losses could be imminent over the next ten years.
• Gold: Central banks have bought significant amounts of gold in 2023, resulting in a high volume of purchases since 1968. The valuation of equities in the US compared to gold is relatively high, with a low value historically indicative of poor equity market performance.
• Japanese stock market: Since 1989, the Nikkei index has not risen in price despite other global stock markets increasing tenfold or more. This was due to the extremely high valuation and the more attractive valuation of bonds at the time.
• Current situation in America: Earnings expectations are in relation to an interest rate of 4%, in contrast to Japan, where earnings expectations were negative and the interest rate was 6%. This could indicate that America will not make much profit.
• Global perspective: In Europe, with 8.5% for equities and 3.5% interest on government bonds, there are few reasons to get out. Falling interest rates and lower share prices during a recession could quickly raise expectations for equities.

Plateau:

• Residential real estate could benefit in economic difficulties as demand remains high and rents rise. Gold could attract more buyers during recessions or geopolitical disruptions, especially if the creditworthiness of government bonds becomes a major issue.
• In more defensive sectors such as healthcare and consumer staples, US stocks could be favored as they are excellently managed, have normal valuations and offer growth potential.
• Despite the growing demand for raw materials due to the energy transition, raw material prices may not rise massively. History shows that new developments and technologies are emerging to meet demand and that the demand for raw materials may change in the long term.

‍