Reinhard Panse's Perspectives
Reinhard Panse's Perspectives
Podcast
31.1.2022
Anyone who has correctly predicted developments on the capital market over the past two corona years must have had certain clairvoyant abilities. The first events did not come as a surprise: the worldwide closure of businesses caused share prices to plummet, the sharpest downturn in the global economy since the Second World War fueled fears of deflation, which is why even inflation-protected asset classes such as government bonds and residential property were suddenly viewed critically.
But within three months of the start of the pandemic, that was all over. The stock markets recovered quickly, and instead of deflation there was one of the strongest consumer price surges in years. I have already explained why this happened and why it did not result in higher interest rates - at least in Europe - contrary to current doctrine in previous Capital Market Outlooks.
I would like to explain once again why inflation, which is currently so surprising for many, will continue to exceed forecasts in the future. One of the main drivers is the shortage of labor. In Germany, the number of job vacancies as a percentage of the total population is higher than it has been for a long time. The particular problem here is that Germany has the lowest unemployment rate in the eurozone. The high demand for labor, combined with a low supply, leads to higher wages and therefore also to higher inflation. For the ECB, however, the average value for the eurozone is relevant, and this is considerably higher. The influential countries of France, Italy - recently governed by former ECB President Draghi - and Spain have even higher values and will vehemently oppose any significant interest rate hikes.
Interest rates are therefore unlikely to rise, despite continued high inflation. In terms of investment strategy, investors should therefore not allow themselves to be put off by price increases. Overall, a wealth with an investment focus on equities and investment funds, supplemented by (residential) real estate and gold, will do well in an environment of higher inflation and continued low interest rates.
Reinhard Panse's Perspectives
31.1.2022
Reinhard Panse
The rise in inflation in recent months has caught even experts off guard. Yet it seems only logical in the context of the economy as a whole. Why investors should not be surprised by high price increases in the future - and what this means for investments.
Anyone who has correctly predicted developments on the capital market over the past two corona years must have had certain clairvoyant abilities. The first events did not come as a surprise: the worldwide closure of businesses caused share prices to plummet, the sharpest downturn in the global economy since the Second World War fueled fears of deflation, which is why even inflation-protected asset classes such as government bonds and residential property were suddenly viewed critically.
But within three months of the start of the pandemic, that was all over. The stock markets recovered quickly, and instead of deflation there was one of the strongest consumer price surges in years. I have already explained why this happened and why it did not result in higher interest rates - at least in Europe - contrary to current doctrine in previous Capital Market Outlooks.
I would like to explain once again why inflation, which is currently so surprising for many, will continue to exceed forecasts in the future. One of the main drivers is the shortage of labor. In Germany, the number of job vacancies as a percentage of the total population is higher than it has been for a long time. The particular problem here is that Germany has the lowest unemployment rate in the eurozone. The high demand for labor, combined with a low supply, leads to higher wages and therefore also to higher inflation. For the ECB, however, the average value for the eurozone is relevant, and this is considerably higher. The influential countries of France, Italy - recently governed by former ECB President Draghi - and Spain have even higher values and will vehemently oppose any significant interest rate hikes.
Interest rates are therefore unlikely to rise, despite continued high inflation. In terms of investment strategy, investors should therefore not allow themselves to be put off by price increases. Overall, a wealth with an investment focus on equities and investment funds, supplemented by (residential) real estate and gold, will do well in an environment of higher inflation and continued low interest rates.
About the author
Reinhard Panse
Reinhard Panse is Chief Investment Officer and co-founder of FINVIA Family Office GmbH. Until February 2020, Reinhard Panse was a member of the Management Board and Chief Investment Officer for HQ Trust GmbH, which is owned by the Harald Quandt family. From 2004 until joining HQ Trust GmbH in 2011, Reinhard Panse was Chief Investment Officer of the UBS Sauerborn business unit created within UBS Deutschland AG. From 2001, Reinhard Panse was a member of the Management Board of Sauerborn Trust AG and its legal predecessors. He was responsible for the investment strategy and played a leading role in the holistic asset management and administration of large private assets. Reinhard Panse began his career by taking over capital market and client support activities at Feri GmbH in 1989, after having founded and managed his own wealth management as managing director.
