Markets

pfp Advisory: “Are we facing a hot autumn?”

Fund manager Peeters sees three major challenges for investors and markets that are here to stay: overvaluation, political intervention and nervousness.

September 7, 2020. FRANKFURT (pfp Advisory). We are still going through very special times. A brief inventory based on three brief moments in conversation that I had experienced over the past ten days.

First: The board of directors of a listed company complains in 1on1 (one-on-one discussion. D. Red). with me about our “planned economy”, he specifically complains that he cannot fill some positions with good people because the massive use of short-time work clearly distorts the labor market and people prefer to hold onto positions with no prospects first instead of reorienting themselves.

Second: In an exchange with me, a financial advisor complains about the decoupling of the capital markets from the real economy, which is being “confirmed by more and more experts”.

Third: A private investor from the private sphere is still worried on the first evening when US tech stocks are slipping more sharply for the first time in half a year, that greater disaster is now threatening there. Three short anecdotes, all of which reflect a little what is going on in the economy and the capital market.

Let’s start with the third: There is nervousness in the sense of fear of falling in the market, which is not surprising after the steep increase, especially among many technology companies. From a sentiment point of view, you have to be happy about corrections. And of course the question is always asked very quickly whether this is the beginning of a new trend. Of course it is too early to be able to judge anything here, but we should be clear: With every point ascent the air becomes thinner. And the nervousness greater and especially the Teslas of this world ran epic in 2020.

That leads well over to the second point and the question of whether, according to Kostolany, the puppy has not completely escaped its master. I think we have to judge differently here. Yes, the extremely expansionary policy of the central banks has significantly widened many valuation multiples, even if not for all stocks. Nevertheless, as an investor, I always have to ask myself what the alternative is. Bonds, real estate or even gold are not cheap at the same time. And that states and central banks are daring an abrupt turnaround in their policy of debt and bond purchases, at least I don’t see it that way.

That leads me to the first and perhaps the most complex point: the massive state intervention, which has escalated again massively since Corona and the effects of which are still far from assessable. I have to send in advance that I found the way politicians deal with the new pandemic in Germany in a prudent and balanced way. The makers in many other countries can learn from this. Nevertheless, one must be careful in many points that a “new normal” does not get out of hand. Starting with the massive debts to the detriment of the coming generations to the makeshift measures in bankruptcy law, which exacerbates the problem of the “zombie companies”: It shouldn’t go on like this forever. Unfortunately the temptation for politicians is great, precisely because such decisive action is positively rewarded by the electorate.

No matter how you twist and turn it: It’s just a wild year and there is little to suggest that it will soon be quieter. We shouldn’t expect this especially from the seasonally typically turbulent autumn.

by Roger Peeters, pfp Advisory.

September 7, 2020, © pfp Advisory

Roger Peeters is the managing partner of pfp Advisory GmbH. Together with his partner Christoph Frank, the expert, who has been active on the German stock market for over 20 years, controls the DWS Concept Platow Fund (WKN DWSK62), a stock-picking fund that was launched in 2006 and has received multiple awards. Further information at www.pfp-advisory.de. Peeters is also a member of the board of directors of the German Association for Financial Analysis and Asset Management (DVFA) e.V .. Roger Peeters writes regularly for the Frankfurt Stock Exchange.

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