On 19 September, the Kathrein Talk 2022 took place at Wipplinger Straße. A unique panel consisting of Monika Rosen, capital market expert, Christian Helmenstein, Chief Economist of the Federation of Austrian Industry and Harald Holzer, Chief Investment Officer of Kathrein Privatbank, addressed the question of how best to invest one's money in these turbulent times.
Christian Helmenstein discussed that due to the "accumulation of major crises" such as Covid, the war in Ukraine and skyrocketing inflation, there is an extreme shortage of everything, of raw materials, of finished goods, of energy, of labour. For him, this scarcity represents the turn of the times. Economic management, i.e. the intelligent use of resources, will therefore once again become a competitive factor that should not be underestimated. The only thing that has not yet become scarce is capital. Why? Digital business models mean that less capital is needed in many industries to be able to generate income. The question investors should now ask themselves is: What does this scarcity mean for my portfolio? The challenge is to identify the companies that are better able to cope in this environment and, above all, can demonstrate promising business models, "the shovel makers of the 21st century". A reference to the fact that during the gold rush only a few prospectors became rich, but those who provided the equipment profited the most.
Harald Holzer presented two possible scenarios for the further development on the markets. Basically, Kathrein Privatbank, currently positioned defensively, is cautiously optimistic. In the first scenario of a "soft landing", the inflation rate would fall to 2.7% by the end of 2023 - both in the USA and in Europe, corporate profits would then trend upwards again and a deep recession could be avoided. The second, pessimistic scenario would mean further massive interest rate hikes in the US, as inflation cannot be contained. Which of the two scenarios will occur is currently difficult to predict. However, we tend to favour the optimistic scenario due to the current mixed situation.
Monika Rosen stated that the FED will continue to raise interest rates in order to get inflation under control. Since the employment rate in the USA is still stable, politicians will not intervene for the time being. Helmenstein also said that a recession in the US has not yet been priced into global markets. A recession in the USA would therefore mean a "hard landing", which would be accompanied by a prolonged bear market. Factors such as the outcome of the midterm elections in the USA at the beginning of November could also play a role, Monika Rosen noted.
At the moment, all three panellists advise caution when entering the markets, as a hard or soft landing is difficult to predict. Nevertheless, at least Christian Helmenstein is convinced, it could be a golden age in the medium term. Commodity prices should drop significantly next year, wages and salaries should rise due to a labour shortage, thus demand would remain high and the shift to a green economy would hold enormous potential for companies. For Monika Rosen, this scenario carries the risk of a wage-price spiral that would entrench inflation. And the development of the markets depends massively on inflation. If inflation rates remained above 4% for a longer period of time, the stock markets would come under strong pressure. Harald Holzer concluded by saying that Kathrein had made the right decision during this year with its defensive course in the bond as well as in the share sector and had thus outperformed the market. The company will remain on this course as long as there are no clear signals for a positive development.