Podium Discussion

“The central banks will react too late.”


Inflation was also one of the prevailing themes tackled by the capital markets panel. Dr. Oliver Lang, Member of the Executive Board of German public pension fund Kirchlichen Zusatzversorgungskasse des Verbandes der Diözesen Deutschlands (KZVK Cologne) believes there is a risk that inflation is not temporary but could instead become a lasting problem. “The economic costs of containing inflation are high. That’s why central banks are likely to react too late.” Although Lang expects a decline in the short term as extraordinary effects taper off, he believes inflation will then overshoot its targets. What can investors do about this? The KZVK is increasing the percentage of public and private equity, real estate and infrastructure within its portfolio, and expects half of its assets to be invested in these asset classes by 2025.

Chris-Oliver Schickentanz, Chief Investment Officer at Commerzbank, praised the US Federal Reserve’s communications. “They announced their tapering plans at a very early stage to avoid spooking the markets – and they did it very well.” The ECB faces a bigger problem due to high levels of public debt in the EU, with Schickentanz convinced that bond yields in Italy are unlikely to exceed 3%. Despite this, central banks are underestimating the problem of inflation. It would be better to take quick, early action and in doing so send a signal to the market that inflation will remain low. However, Schickentanz fears that the ECB will not do this. For asset allocation purposes, he is increasingly shifting his focus towards Asia, saying: “China wants to be the world’s largest economy by 2036 – it belongs in the portfolio.”

Dr. Gerhard Ebinger, Managing Director of Seedamm Vermögensverwaltung, is not frightened of this turbulent outlook, explaining: “Holding your nerve is half the battle. We buy once the markets have fallen.” Similarly, Ebinger does not see inflation as “the big problem”; instead, he expects that what he believes to be the significant overvaluation of major US tech companies could become an issue sooner or later. He takes a positive view on Asia and particularly China, which in his view represents an opportunity for entry after a weak 2021. Last but not least, Ebinger revealed himself to be a fan of small and mid caps, explaining that even among the smaller and smallest stocks there is “a whole host of forward-looking companies and as-yet-undiscovered gems”.

Like the other panellists, while Dr. Götz Albert, Partner and CIO of Lupus alpha, did not want to rule out the possibility of persistently high inflation rates, he was also hopeful that the upcoming normalisation of monetary policy will not get out of hand. He sounded a particular note of caution about the 13-year bull market for equity investments, and said that macro themes also make him uneasy. According to Dr. Albert, it is more important than ever to look closely at the fundamental data of individual companies, and avoid liquidity-dependent stocks at all costs. In particular, he sees a number of stocks in the small and micro-cap segment with the potential to generate sustainable growth by themselves.