indexes in this article
• Inflationary pressure is forcing central banks to raise interest rates
• Fund manager Peter E. Huber relies on anti-cyclical investing
• Europe could slip into recession
Escalating inflation is currently one of the biggest concerns of market participants. According to fund manager Peter E. Huber, this problem is homemade. The central banks are responsible, which have printed money without end, which is now having an effect on expenditure due to the excessive debt policy of the states. The Ukraine war would only exacerbate the problem and now serve as a “cheap excuse for blatant policy mistakes.”
At least the international central banks have recognized the danger and are now tightening theirs monetary policy. The Fed has already raised its key interest rate twice this year and has also announced further rate hikes for the coming months. The ECB is a bit slower, but has at least announced that it will end its multi-billion dollar net asset purchases on July 1st. Also, she has one for her next session in July rate hike signaled by 25 basis points.
As a rule, interest rate hikes hit growth stocks particularly hard because they are usually more heavily leveraged. So it’s no wonder that the technology stocks, which have been heavily hyped in recent years, have had to take a beating this year. For example, the NASDAQ Composite has lost over 27 percent in value since the beginning of the year (as of June 10, 2022).
But according to Huber, a (temporary?) recovery is already emerging for technology stocks. That’s why investors who still own tech stocks should stop selling now, advises the fund manager at Taunus Trust. On the other hand, in his opinion, it is still too early for massive purchases of shares.
“We are still seeing an unprecedented accumulation of crises and challenges: climate crisis, war in Ukraine, COVID pandemic in China, interrupted supply chains, more restrictive central banks, high inflation rates, etc. But these factors are well known and should therefore be at least partially taken into account in the current In any case, numerous sentiment indicators point to this, which indicate massive pessimism on the part of investors,” quotes “Institutional Money” Peter E. Huber.
The expert explains that there has not yet been a major sell-off on the stock market as follows: “Most investors are still holding on to their positions, although they are so negative. A real sell-out with high turnover has not yet taken place, presumably because it there is a lack of alternatives to shares and bonds, precious metals and cryptocurrencies also had to give up feathers.”
Risk of recession in Europe
Although Huber considers it possible that inflation rates could now decline due to base effects, Europe in particular is still a long way from a lasting calm. In fact, he wouldn’t be surprised if Europe went into recession.
But recession phases are always good opportunities to buy shares cheaply, the expert is able to gain something positive from such a scenario. But things are not that far yet, says Peter E. Huber.
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