“In America there is still interest for everyone”

From the point of view of the top fund manager of the asset management company DJE Kapital, German stocks are not expensive. Even so, he has become more cautious and holds more bonds and liquidity.

The euphoria is gone: stock exchange trader in Frankfurt

Hong Kong, Taiwan, North Korea, Iran, Kashmir – the world is worried about many international conflicts right now. What should investors change in view of these risks?

International crises have always existed. With the mobile internet and social media, these events seem ubiquitous. That is the difference to yesterday’s world. The American stock index has moved well up on average over the past century. Even two world wars could not change that. Even if China sends military to Hong Kong, the West is unlikely to interfere there directly and would leave it at appeals. With a view to regional conflicts such as in Kashmir, investors are primarily wondering whether this will derail the global economy. It is very unlikely. However, it can happen that one party to the conflict crosses a red line or presses the wrong button.

With the American president, of all people, one of the most powerful decision-makers is betting on escalation. How dangerous is that for the markets and the economy?

In my opinion, Trump is not a warmonger, although he can be criticized in many ways. He called off the threatened military strike against Iran, which caused a détente. The conflict over North Korea’s nuclear armament was also about to escalate, but then Trump let the matter end gently. Investors and investors have now got used to the fact that crises and relaxation alternate quickly. The Dax has recovered somewhat from the slump following the escalation of the trade war. But America could introduce new tariffs on European cars in the fourth quarter. There is therefore a strange mood in the markets: things are looking up, but without euphoria.

Are there any changes in the strategy of your funds and what are they like?

We have become more cautious and are holding more cash. I cannot name a single liquidity ratio, it differs from fund to fund. We are also investing more in safe bonds.

But they don’t do anything anymore.

That is only partly true. It is true that bonds around the world have negative yields equivalent to the equivalent of 15 trillion dollars. But in America there is still interest for everyone. Unlike in Europe, there are no negative interest rates on the American market. Private investors, pension funds and insurance companies can still earn money there with bonds. Bonds with good yields can also be found in the emerging markets of Brazil, India and Russia.

Ulrich Kaffarnik, board member and fund manager of the asset management company DJE Kapital
Ulrich Kaffarnik, board member and fund manager of the asset management company DJE Kapital: Bild: DJE Capital

Can investors trust emerging market politicians?

The stock market loves autocrats when they ensure stability. In Brazil, the Bovespa national stock index has almost doubled since Bolsonaro’s inauguration. In Turkey, on the other hand, Erdogan is messing up the markets and the economy.

So would you prefer German stocks – or has the train set off after the price increases since 2012?

German stocks are not expensive. They only look expensive because the Dax stock index is usually shown as a performance index. This means that the index takes into account the price increases as well as the dividends and also assumes that the distributions will be reinvested immediately. Let’s look at the Dax, on the other hand, as a price index – i.e. without dividends – it is currently only around 5200 points. That is lower than in the middle of 2000. In contrast, share prices are really high in America.

Even so, your funds are cautious and hoard liquidity. Will negative interest be due there?

The banks charge us negative interest which is charged to our funds. Many don’t like this, but it’s mostly psychology. When we sell stocks to avoid an imminent decline in prices, it more than makes up for the negative interest on bank balances. For example, if you don’t want negative interest rates, you can invest in dollars instead of euros.