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FERI Markets Update September 2020 - Equity markets on the verge of a change of guard

Bad Homburg, 09/21/2020
by Dr. Eduard Baitinger, FERI
  • Technology stocks with decreasing dynamics
  • Cyclical sectors move into focus
  • FED strategy change weakens US dollar

So far this year, US equity markets, driven by the major technology stocks, have clearly dominated the rest of the world. However, very little of this dominance has remained recently. In the meantime, the high market capitalization of megacaps has rather become a burden, pulling the entire US stock market down. The correction among the tech giants still appears to be a technical market adjustment after previous overheating. But the relative weakness of the technology sector could persist in the medium term if investors focus more strongly on the period after the corona pandemic. Despite the continued high number of CoViD19 cases at the global level and a rampant second wave in the eurozone, it is increasingly foreseeable that a functional vaccine will be available in 2021 and a gradual return to normality will take place. In this scenario, the main services offered by tech companies, such as online shopping, streaming and social networking, would be less in demand than during the pandemic. On the other hand, cyclically sensitive sectors that were disproportionately affected by CoViD19 would be the clear winners as soon as the economy has stabilised on a sustainable basis. A corresponding rotation into cyclical stocks is already emerging and, in the event of an emergency, will cause a clear rethink by investors who have been focusing on the tech sector for years.

Consequences of the new FED strategy

Another development that investors should keep an eye on is the US Federal Reserve's change in strategy. In the future, the FED wants to be much more tolerant of higher inflation rates if, as is currently the case, inflation remains below the target level of 2% for a longer period of time. According to this principle of so-called "average inflation targeting", a long period of zero interest rates can be expected. Other central banks such as the ECB are likely to adapt the monetary policy strategy of the FED in a similar way. As a result of the FED's change of course, the USA could gradually develop into a low-interest region and the temporary weakness of the US dollar could thus become chronic. The FED's higher inflation tolerance could even lead to real interest rates, which are already in negative territory, falling to even lower levels in the future. In this scenario, the prospects for money investments in precious metals in particular would improve. Against this background, investors should review the weighting of the US dollar in their strategic asset allocation and give precious metals a firm place.


About Dr. Eduard Baitinger

Dr. Eduard Baitinger has been Head of Asset Allocation in the FERI Group since 2015. He is responsible for quantitative asset allocation at FERI Trust, where he also manages and coordinates numerous research projects. In close coordination with the FERI Board of Directors and Chief Investment Officer, Dr. Heinz-Werner Rapp, he also represents the investment strategy of the FERI Group and its communication to clients and customers of FERI.

Before joining FERI, he was a research assistant at the University of Bremen and financial analyst for an asset manager. In 2010 he completed his studies at the University of Bremen, accompanied by a stay abroad in New York, as a graduate economist. In 2014, Eduard Baitinger received his doctorate with distinction on new approaches to quantitative asset management. Dr. Baitinger publishes regularly in academic journals and acts as academic reviewer.


About FERI

Die FERI Gruppe mit Hauptsitz in Bad Homburg wurde 1987 gegründet und hat sich zu einem der führenden Investmenthäuser im deutschsprachigen Raum entwickelt. Für institutionelle Investoren, Familienvermögen und Stiftungen bietet FERI maßgeschneiderte Lösungen in den Geschäftsfeldern:

Das 2016 gegründete FERI Cognitive Finance Institute agiert innerhalb der FERI Gruppe als strategisches Forschungszentrum und kreative Denkfabrik, mit klarem Fokus auf innovative Analysen und Methodenentwicklung für langfristige Aspekte von Wirtschafts- und Kapitalmarktforschung.

Derzeit betreut FERI zusammen mit MLP ein Vermögen von 39,6 Mrd. Euro, darunter 9 Mrd. Euro Alternative Investments. Die FERI Gruppe unterhält neben dem Hauptsitz in Bad Homburg weitere Büros in Düsseldorf, Hamburg, München, Luxemburg, Wien und Zürich.



Media relations contact

Katja Liese

Member of the Management Board

Corporate Strategy, Marketing and Communications

T +49 (0) 6172 916-3192

F +49 (0) 6172 916-1192

presse@feri.de

FERI AG

Rathausplatz 8-10

D-61348 Bad Homburg

Dr. Eduard Baitinger
Dr. Eduard Baitinger
Dr. Eduard Baitinger
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Katja Liese
Member of the Management Board
Corporate Strategy, Marketing and Communications

T +49 (0) 6172 916-3192
F +49 (0) 6172 916-1192
presse@feri.de

FERI AG
Rathausplatz 8-10
D-61348 Bad Homburg

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Katja Liese
Member of the Management Board
Corporate Strategy, Marketing and Communications

T +49 (0) 6172 916-3192
F +49 (0) 6172 916-1192
presse@feri.de

FERI AG
Rathausplatz 8-10
D-61348 Bad Homburg

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