Focus on the USA: soft landing scenario still unlikely

A "soft landing" for the US economy remains unlikely despite the currently favorable economic and inflation data. Higher volatility and significant setbacks on the equity markets can therefore be expected over the remainder of the year. In this uncertain environment, FERI continues to rely on an active multi-asset strategy in order to participate in current trends in the best possible way, but also to be prepared for changes in direction on the capital markets. "In view of the continuing recession risks in the USA and high geopolitical uncertainty, a broadly diversified portfolio across various asset classes with active risk management promises the greatest investment success," said Dr. Marcel V. Lähn, FERI Board Member and Chief Investment Officer, at the FERI Online Spring Conference in Bad Homburg. 

US economy facing moderate recession

In a very weak global economy, the focus is primarily on the USA, which is currently playing a special role with its robust growth rates. This is likely to remain the case until well into the summer: Although the inflation rate is only falling slowly, it is no longer very far away from the 2% target. It is therefore to be expected that the Fed will make its first interest rate cut in June and that the economy will continue to grow. However, this fundamentally positive outlook cannot hide the fact that the momentum of overall economic demand is slowing. "Now that surplus savings have largely been reduced, the savings rate is already very low and high interest rates are leading to rising loan defaults, private consumption will no longer continue to grow as it has in the past in the second half of the year. We assume that this will lead to a noticeable rise in the unemployment rate, which, according to all historical experience, will result in a moderate recession in the US economy towards the end of the year," explained Axel D. Angermann, Chief Economist at FERI. For investors, this means that they will have to adjust to changes in the outlook for the individual asset classes: equities would still offer opportunities for the time being, but would become increasingly susceptible to corrections over the course of the year. However, bonds could then offer good prospects as interest rates fall due to the recession. 

Trump as a risk factor

The political climate in the USA is expected to deteriorate sharply due to the upcoming presidential elections. Entrepreneurs and investors should consider the possible consequences of Donald Trump's election victory in good time. The belief that Trump will pursue business-friendly policies could turn out to be a serious miscalculation. "Under Trump, there is not only the threat of US democracy being transformed into an autocratic system, but also a forced restructuring of the global order with the USA and China as two confrontational power blocs. Europe and its economy are thus increasingly finding themselves in a dangerous sandwich position," explains Dr. Heinz-Werner Rapp, founder and director of the FERI Cognitive Finance Institute, in an interview with Dr. Marcel V. Lähn, CIO of FERI. In a world that is facing major changes and is becoming increasingly unpredictable and uncertain due to a lack of global principles of order, higher geopolitical risk premiums are inevitable.