The same picture of falling inflation can also be seen in relation to Europe as a whole and can be seen as a reversal trend with regard to expectations, so to speak.
The US dollar still dominates the world, but the emerging strength of China as an established economy with its own domestic market-oriented cycles will sooner or later lead to a shift in the individual currency strengths. Any effects can already be seen in the past few years, despite rising interest rates in the USA, there was a long-lasting US dollar weakness, coupled with high fluctuations in the currency market. International investors are still relying on the greenback, but it is only a question of maybe a decade before the global currency basket, with all its dependencies and influences on economic cycles, will certainly include pricing with other currencies, which is so important Commodity market. “” The US remains to tip the scales when it comes to Trump’s tariffs in the direction of Europe, “” summarizes the asset manager. “” The economic forecasts for Europe and especially Germany published in the past few weeks clearly show that we have become the plaything of the great powers. Not only do all common and analyzed indicators predict a negative development (details on this in the individual market analyzes), the mood is also characterized by great fears, which is particularly evident in the automotive industry and suppliers “, says Zschaber.
Anyone who has been watching US President Donald Trump for a long time will have noticed that the desire for import tariffs in the automotive sector has existed for decades, because he once coined the statement that every Mercedes-Benz rolling through the country and all Asian products ( Japan and China were meant) would be subject to a higher tax, one would have a constant economic upswing in the USA and really valuable allies. In this context, the fears are justified in Germany, one of the largest export nations, so to speak. Despite the trade conflicts, German companies have made the highest export contribution to date, with goods worth almost 1.3 trillion euros exported in 2018, which corresponds to almost 3 percent more exports than in the previous year and around 5.7 percent was on Goods more imported.
The resulting import value can be estimated at just under 1 trillion euros, although the increase in Germany’s imports from EU countries is remarkable, which speaks for an increasing competitiveness of these. In return, the countries of the European Union also imported goods worth more than 778 billion euros, while Germany exported more than 539 billion euros to third countries, with China being the largest trading partner. This example alone within Europe and towards China shows the dependency in our global world. “” The complexity and interrelationships in the global value chains have increased enormously and make it clear which risks could exist if decisions are made against free trade, “” the expert continues.custom biology essay writing service Suppliers in particular, who purchase raw materials or intermediate products from other markets, which may have been subject to customs duties, could suffer severely, and the possible efficiency shifts on the growth curve from market to market and country to country and reduces the exchange of goods This has a negative impact on the economy, which also shines through on companies. USA in detail: Donald Trump’s policy with regard to trade tariffs seems to be facing increasing headwinds, because the data now published and analyzed in the survey of the “” World Index “” are examples of this. “” Within just one year, the so-called “” US Economic Optimism Index “” fell by more than 12.8% to a level of 50.3 “”, summarizes Zschaber. Although the smaller companies in the USA were still very optimistic in the last quarter of last year, it is now slowly being recognized on the basis of the actual figures that there could be an even sharper economic change than expected in the last few days.
Although the tax reform is still showing itself to be a positive influencing factor this year, probably until the third or even fourth quarter, with a view to the publication of retail sales, a massive decline has been published. In addition, there is a slight weakening of producer prices of 0.1 percent, which should only further support the withdrawal of the FED’s policy of increasing interest rates and keeping interest rates at the current level. In spite of these data, a slight decrease in consumption must also be analyzed and a decrease in consumer price on an anualized basis of 1.6 percent.
It should also be noted that foreign direct investment has risen slightly in recent weeks, due to the strong fundamental valuation of the USA at the end of 2018. The current export figures show a decline, although after the strong months of last year they have reached the level of October have fallen behind, here you have to take a look at the upcoming publications in order to make a qualitative forecast, as there have been many pull-forward effects, especially due to the international tariff discussion. The balance of trade mentioned by Donald Trump is slightly and minimally falling. Europe in detail: With a look at the inflation figures for Germany, which fell by 0.80 percent, the dilemma of the ECB, which an inflation target for the euro zone in the amount of 2 Percent had called even more clearly. There is no room for maneuver in terms of interest rates due to the high debt ratios in the individual countries as well as in some corporate sectors, as some companies can only maintain themselves through cheap debt, but could become insolvent if interest rates rise. “” Explicitly, one should also keep an eye on the corporate bond sector, which is likely to have higher default rates, depending on the rating, “” continues Markus C. Zschaber. The same picture of falling inflation can also be seen in relation to Europe as a whole and can be seen as a reversal trend with regard to expectations, so to speak.
A different picture emerges for producer prices, which have risen slightly and could lead to a reduction in margins for companies or to prices that could affect consumers and their behavior. Germany’s trade balance as the largest exporter shows a minimal reduction compared to the previous month, this affects both the domestic economic area and third countries. Despite slightly lower export prices compared to the previous month, this could not be absorbed. The unemployment rate is unchanged and does not yet indicate low capacities, but the productivity curve is still falling. For the whole of Europe, however, a decrease in capacity is to be expected, here a flattening development or
Demand development, with the level well above the five-year average. With regard to the degree of utilization of the overall economic production capacities, this is viewed as the central variable in the business cycle, and therefore deductions can be made from the future business cycle. The changes also indicate whether or not future investment activities will be pursued. “If global demand calls for this again, as in previous years, a reduced propensity to invest could lead to capacity bottlenecks in industry and the service sector,” said the administrator.
Due to the issue of trade tariffs, the possibility of sharply rising tariffs in the automotive sector in relation to Germany and the current situation around the unresolved Brexit, the entire set of figures for Europe and Germany provides a declining economic picture. In this context, however, it is important to note that if the political situation changes around the challenges described, the economy would take a deep breath and, due to the low interest rate level and the existing cyclicality, has strong catching up potential and the economic growth forecasts for 2019 are all revised upwards China in detail: China’s economy is more stable than many market participants have forecast. Although growth is a little more restrained in terms of dynamics, the figures collected already show minimal positive changes that are caused by the stimulation of the Chinese government through fiscal policy. Be it the topic of infrastructure with increasing expenses and effects for industry as well as the topic of services, which are still at a very high level, the demand is there. The self-contained domestic economic trend also plays a very important role, because the consumer mood is unbroken and the way from the workbench of the world, with a high export share, is changing significantly towards own developments.
This is particularly evident in the volume of imports from the USA, which is classified as low in terms of the total numbers. Declining inflation is an interesting indicator, as it shows the adjustment to western conditions in the overall economic area. However, there are also negative developments, since, for example, international capital flows have decreased and there was a negative development in the first few weeks of the year. However, imports were even able to surpass the December 2018 result, with a high in January 2019 compared to the same month last year, with an upward trend.
A big correlation is certainly that China has already lowered its export and import tariffs several times in order to further stimulate consumption and counteract the effects of the trade dispute with the USA. However, exports recorded a slight decline for the third time in a row, but are roughly at the level of the last quarter of 2017. This is also due to various pull-forward effects that occurred in exports due to the tariff discussion.
As in the USA, producer prices have fallen, as have export prices. “China in general can be described as a stable axis in the world economy, certainly in direct dependence on the initial situation of the US tariffs”, explains Markus C. Zschaber Outlook for investors: Furthermore, the political risks are the sword of Damocles over the markets. Despite the flattening of the global economic curve, however, global growth should remain above or just below the 3 percent mark for quite a while. “” The data on the “” World Index “” definitely do not show that the global economy is cooling down too much or even a recession. Just a look at the global value chains shows how different the effects of trade disputes, for example, should be depending on the region, sector and company or even a Brexit. The global diversification in the investor portfolio should therefore increase in the future, diversification within an asset class and below the various asset classes is the answer here, “” said Zschaber.
The global interest rate continues to trend around 1 percent, so normalized interest rate levels are still not to be expected. The levels are still at record lows, making an end to the global credit cycle very unlikely. In summary, when selecting the investments in a portfolio, the asset manager sees the greatest opportunities and the most important drivers for successful performance in the months and years to come. Exposure to equities is still absolutely preferred, because equities remain the essential source of return for a balanced portfolio when all factors are taken into account. “” It will be important to recognize that with broad market investments nobody is likely to be really successful anymore, as individual styles or sectors are likely to perform particularly well in the future. I am convinced that the “value” factor will play a major role in the future.
This means that companies will be sought above all whose current price is below the value of a company’s future cash flows. Or to put it simply, that the company’s expected future cash inflows justify a higher share price, “” explains Markus C. Zschaber. Strategy Changes in the model portfolio: the focus is especially on small caps, for example MDAX. The model portfolio for the “” World Index “” includes various asset classes such as stocks, corporate, convertible and government bonds as well as raw materials and precious metals. The portfolio has been actively managed for five years and also hedged depending on the market phase, so that the cash quota can be flexibly increased or minimized depending on the capital market situation.
ETFs on indices and markets are also used for hedging and profit-taking. With this type of direct mapping of the “” world economic cycle “”, the model portfolio has succeeded in generating a constant and higher performance than the MSCI World. More information on this at www.zschaber.de On the method: The basis of the “” World Index “” is the analysis of economic indicators from all over the world, which have a high economic relevance and a high reaction on the financial markets. These are published worldwide by statistical offices and research institutes as well as other high-ranking scientific sources. In its final form, the “” World Index “”, which consists of two components, the “” Index of economic data “” and the “” Index of market expectations “” focuses on the 50 most important economic data per month, based on more than 1000 international indicators that are determined and evaluated monthly.
The linking of the data series in a weighting structured according to dominance factors provides information about the cycle and stage in which the global economy is. Due to the combination of early-cycle, same-cycle and post-cycle indicators and the integration of an expectation component, the “” World Index “” enables a very precise measurement of the current status. To simplify this, two trend data are then created that provide information about how much of the data determined has fallen or increased in the past four weeks.
For more information, go to: www.weltindex.de The sample portfolio for the “” World Index “” is to be understood as accompanying information only and does not serve as specific investment advice.