Equities remain the most promising liquid asset class.
(Photo: Reuters)
Frankfurt A good 800 points down, 400 up, briefly in the black, only to then drop again: These fluctuations in the leading German index Dax on Monday and Tuesday show how Vladimir Putin’s loud saber-rattling and the now clear reaction of the western world are determining what is happening on the capital markets. Investors fled the stocks, which were prone to fluctuations, into the well-known, quieter money parking lots: bonds from western countries, gold and, of course, accounts.
But professional investors in particular jump back in quickly when they see lower prices in order to secure the cheaper shares immediately. That stabilized the major international indices again on Tuesday amid the political escalation.
The Dax was even up for a short time – also because investors assume that such a conflict, albeit one that threatens world peace, will only briefly affect the capital markets, as so often in the past.
For the time being, global politics is likely to continue to dominate the prices on the capital markets – depending on what the rulers in the geographically largest country on earth can come up with. Strategists fear that a military conflict over Ukraine could push the German Dax down to around 13,000 points.
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Investors with a longer investment horizon can still remain cool – at least with regard to their portfolio. There are some indications that their shares will suffer only briefly this time as well.
Equities are still the most promising liquid asset class overall. It is true that many German companies are likely to suffer particularly from sanctions against the country because of their intensive trade with Russia. But because they usually do business in many countries, they should be able to cushion this to some extent.
Company profits and dividends are known to be the basis for price gains in the long term. At least until recently, entrepreneurs in the country believed that the Ukraine crisis would not slow down the German economy. This is shown by the much-noticed mood barometer of the Munich Ifo Institute, the business climate index, which rose in February.
For long-term investors who can live with price fluctuations in their portfolio, there is still hardly any alternative to shares. Interest rates on bonds are still low, and bonds do not offer protection against inflation anyway. And other so-called tangible assets such as real estate are sometimes even more expensive and not so easy to get.
Investors should, if possible, remain calm – and just wait and see. Or follow the pros and buy their favorite titles cheaper.
More: How investors can put together a portfolio of ETFs and indices