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Optimistic Outlook: Opportunities for Economic Recovery through Interest Rate Decline and Artificial Intelligence
Despite the current economic challenges, there are positive developments that give hope for a recovery. Falling interest rates and inflation reduce borrowing costs, promote investments, and increase demand for stocks and real estate, which revitalizes the markets. Additionally, artificial intelligence offers great potential for productivity gains and innovations that could initiate a new growth phase. These opportunities can be harnessed with a strategic approach and political will to steer the economy onto a more sustainable path. We have restructured our mandates and look to the future with optimism.
Chart of the month
The data shows that the German economy has been declining in recent quarters in both real GDP per capita and the manufacturing sector (PMI). These indicators suggest a persistent economic weakness, exacerbated by falling production and external factors such as high energy prices and inflationary pressures. Particularly concerning is the real loss of purchasing power, which burdens households as they need to work longer to maintain their standard of living.
This reduces private consumption and exacerbates social inequality, especially for low-income households. At the same time, companies are less willing to invest due to weak demand. To counteract this downward spiral, targeted political measures are needed to strengthen purchasing power and promote investment—an insight currently lacking in Germany.
News
Unusual Phenomenon in the Swiss Mortgage Market"
In June 2024, the volume of outstanding mortgage loans decreased slightly by 0.1%, which is a rare exception. A similar decline was last observed in December 2007. Despite this decrease, the total volume is still 2.3% higher than the previous year. The decline occurred during a period when the Swiss National Bank (SNB) lowered interest rates, which would typically stimulate credit growth. It is believed that this decline is more likely a statistical outlier, and the mortgage market could see growth again in the future.
New ETFs with Options Strategies: Opportunities and Risks for Investors
ETFs are increasingly incorporating call or put options instead of merely tracking traditional indices or baskets of stocks. Particularly in the US, but also in Europe, new ETFs are being introduced that utilize these strategies, such as those combining Nvidia or Tesla stocks with the so-called covered call strategy. This strategy can achieve higher returns under certain market conditions and provides a risk buffer. While such innovative ETFs have established themselves, there are also questionable examples, such as an ETF on MicroStrategy, a company heavily invested in Bitcoin.
The Fed will also soon be able to gradually lower interest rates
Inflation, as measured by the PCE index, remains stable at around 2.5%, which is in line with the Fed’s target. Fed Chair Jerome Powell hints at an upcoming interest rate cut, as inflation appears to be under control and the labor market remains robust.
However, there are concerns about a possible recession, as these often began after rate cuts. Nevertheless, economic data remains solid, and growth in the second quarter was surprisingly strong. The next important data, such as the jobs report, will influence the future course of monetary policy.
Warren Buffett with the highest cash reserves in years
At the end of Q1 2024, Berkshire Hathaway’s cash reserves stood at $157.2 billion. In recent decades, the cash balance has never exceeded $150 billion. Apparently, Buffett is waiting for the right moment to make attractive acquisitions.