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German veteran investors clash over equity outlook

German veteran investors clash over equity outlook

Heavyweight names from German fund management have offered differing views on what will drive equity markets over the coming year with a split between positivity and controlled pessimism.

This became apparent during the discussion round at Fondsprofessionell Kongress in Mannheim which featured Bert Flossbach, Klaus Kaldemorgen, Olgerd Eichler and Peter Huber.

When asked about his outlook, Kaldermorgen said: ‘Many investors are now lulled into false security and don’t see any risk any more. They believe that returns and economic growth will continue until 2019.'

Kaldemorgen questioned this positivity and added that this certainty could be undermined. Meanwhile, Flossbach said timing might be the biggest challenge in 2018.

‘My only concern is that I am pessimistic way too early,’ said Flossbach, as the Cologne-based manager expects a significant correction in anticipation of interest rate reversal.

Looking at the broader market, Eichler offered a different stance on the subject. He said bull markets inevitably end and the fixation with spotting the point was misguided.

‘The equity market hasn’t reached the tipping point yet and the world economic cycle will not experience a reversal,’ Eichler added.

When it comes to inflation forecasts Huber, who has recently stepped down from active management at StarCapital, anticipates an overall significant development of 4-to-5%. However his forecast for 2018 is only 2%.

He said this development is also supported by central banks that are not fighting inflation anymore but rather want it to increase.

Kaldermorgen added that this year it will be difficult to achieve any returns in the fixed income portion of the portfolio. 'Here you can rather achieve stability, as returns are generated via equities, but this is likely to be difficult.'

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