Stock exchange professional Jens Ehrhardt: setback potential for the Dax "maximum at a good 10 percent"

Created: 2022-01-25 15:14

By: Matthew Schneider

The recent fall in prices on the stock exchanges is causing growing concern among investors.

Fund legend Jens Ehrhardt still firmly believes in equities – and even sees new investment opportunities.

Mr. Ehrhardt, the values ​​of the American indices Nasdaq and S&P 500 have been falling since the beginning of the year, the same applies to the German Dax.

Chart analysts expect a longer-term trend.

Do you share this view?

No, I don't believe in that.

It is clear that the prices will now drop a bit because the US Federal Reserve will raise interest rates and at the same time stop buying bonds.

But I think that discounts in the Dax will amount to a maximum of ten percent and not 30, as some analysts think.

What makes you confident?

Fed Chairman Jerome Powell has learned something new: In the fourth quarter of 2018, he not only stopped buying bonds, but even sold bonds to reduce liquidity.

Prices fell by over 20 percent back then and he had to make a 180 degree turn.

That's why he will react more prudently this time.

The fact that he is now simultaneously reducing the purchase programs and raising interest rates is due to the political pressure on Joe Biden, who is very unpopular because of the high inflation of seven percent - and this year there are midterm elections in the USA.

In addition, money has now been pumped into the American markets for two years, and there are currently around two trillion dollars in excess capital in the banks.

That means the Fed could easily dump bonds for a year before there really is too much liquidity flowing out of the system.

That's why I believe

Fund manager Jens Ehrhardt © DJE Kapital AG

What does this mean for Europe?

The ECB says they want inflation to be at 2%, but I think they can live with 3%.

In principle, I do not expect a turnaround in interest rates until mid-2023 at the earliest. The reason for this is the great influence of the Mediterranean countries and France on the ECB.

The French in particular have incurred generous debts, which means that the leading index CAC has developed twice as strongly as the Dax.

Therefore, they benefit from higher euro inflation, which devalues ​​the debt.

However, it must be said that inflation is mainly due to a shortage of supply in the energy sector and should therefore fall again on its own.

What does that mean for investors who want to sell their portfolio in two years?

I still think stocks are the best form of investment, far ahead of real estate and fixed income.

But you have to see which stocks you have in your portfolio.

US indices are determined by a maximum of ten large stocks – often American tech stocks.

If the end of the pandemic actually approaches now, they would lose the Internet boost.

They also pay little or no dividends, which could encourage investors and fund managers to switch to cheaper stocks.

Papers from banks or utilities, some of which pay dividends of around four percent, are currently more interesting.

But oil companies are also currently valued low.

Some of them are currently even switching to renewable energies and are therefore also exciting in the long term.

And what about long-term investors who want to save for about 20 years?

America will be stronger than the rest of the world with more capital and fewer restrictions.

At the moment I would not buy because of the very high rating, but rather wait and see.

American stocks have a price-earnings ratio of about 22, in Germany it's closer to 15. Asian stocks are better, where you can expect a lot of growth.

China is also very cheap at the moment, you just have to see that the real estate crisis with Evergrande is not getting out of hand.

Japanese stocks are safer: They have suffered for decades from a weak economy and are therefore extremely undervalued, which also applies to the currency.

But also in Europe we could experience for the first time that the indices rise faster than in the USA: Due to the dwindling influence of the Bundesbank, which has always put the brakes on

we have lower interest rates and more new debt in Europe than in America.

That will drive the stock markets.

Is it now worth buying cyclical stocks such as car manufacturers?

I would wait a bit with car manufacturers at the moment because you don't know how the central bank signals from America and the switch to electric motors will work.

Basically, I would now start more defensively with banks, oil stocks, utilities and telecom providers and later switch to consumer stocks.

Renewable energies are considered a trend, but some of these stocks are currently listing.

This is because people bought the paper in good faith without looking at the very high valuation.

These include, for example, some Danish stocks.

Some of them have now fallen by half due to delivery problems and general corona concerns.

In the long term, however, one should not miss the topic, because it is politically wanted in such a way that it prevails.

Relatively cheap stocks in this area are battery manufacturers from Asia, for example from South Korea.

Experts expect Omikron to mean the end of the pandemic.

Is it now time for bargain shopping in tourism?

You have to see that some papers already have hopes of higher profits priced in.

However, if Corona is no longer a major issue in three months, the papers of airlines, hotels and airport operators will also rise sharply.

But you have to realize that tourism stocks are traditionally heavily indebted and very volatile, meaning there's no telling when they'll bounce back.

Not only the chances, but also the risks are above average, so you shouldn't buy too many.