Majority in the US House of Representatives is certain

Good morning dear readers,

Anyone who has ever stood in a supermarket queue in the USA, which moves at the typical walking dune pace, will probably not be surprised that the counting of votes takes a little longer there. During the night, however, according to consistent reports from the US media, the Republicans achieved what has been evident since the general election eight days ago: An absolute majority in the House of Representatives.

Were you like me? Have you also fervently hoped (or even prayed?) that the fatal missile strike in Poland was some kind of accident and not a Russian provocation – or even the start of a larger Russian attack on NATO territory?

Well, the hopes seem to have been confirmed, apparently it was a misguided Ukrainian anti-aircraft missile that the country wanted to use to defend itself against massive Russian airstrikes. You can read everything about the technical details of the incident here.

What lessons can be learned from what happened?

• First things first: nobody in the circle of NATO countries tweeted hysterically, nobody called for any kind of retaliatory strikes. In particular, the Polish state leadership directly affected was a model of prudence according to the line: first clarify the facts, then discuss reactions.
• The same cannot be said of the Ukrainian leadership. Shortly after the incident, President Volodymyr Zelensky spoke of an “attack by Russia on collective security” and of a “very significant escalation”. Stefan Meister, Russia expert at the German Council on Foreign Relations (DGAP), sees a strategy behind this: “Ukraine and President Selenski in particular are rhetorically playing with getting NATO more involved. It is hoped that this will result in more military support.”
• Russia expert Meister fears that incidents like the one in Poland increase “the danger of a major war in which NATO is directly involved with its own troops”.

In view of this danger, it is thought-provoking that US Chief of Staff Mark Milley apparently tried in vain to contact his Russian counterpart, Valery Gerasimov, after the missile hit Poland. All efforts by his staff to reach the Russian chief of staff have been unsuccessful, Milley said in Washington on Wednesday. In extreme cases, such a direct line can decide about the Third World War.

The China strategy of the traffic light coalition is something like the political version of the sixth studio album by the US rock band Guns N’ Roses: announced for ages, eagerly awaited, the release date just as mysterious as the content.

The first draft of the China strategy from the Federal Foreign Office is now circulating in Berlin. “Spiegel Online” was the first to report on the document. The 59-page strategy paper rates China as a “partner, competitor and systemic rival” and at the same time states: “However, the latter two aspects are becoming increasingly important.”

One of the concrete political ideas from the document: On the basis of existing disclosure obligations, companies that are particularly exposed to China should be “obliged to specify and summarize relevant China-related developments and figures, for example in the form of a separate notification obligation” – a China stress test for corporations.

If you want to guess how little some German entrepreneurs and top managers might like this China strategy, you only have to put the Handelsblatt interview with BASF boss Martin Brudermüller next to the draft from the Federal Foreign Office. Brudermüller says: “At the moment it seems to me that only the negative is seen one-sidedly when it comes to China.”

In fact, the former political plurality within the Communist Party has declined and it has become more one-sided: “That worries me too”. But above all, Brudermüller praises “this highly dynamic China, which is making rapid technological progress and already accounts for almost 50 percent of the world market in our industry”.

Brudermüller is unperturbed by his group’s significant exposure to China: “If you don’t want to take any more risks, you would have to leave the country and the huge market.”

Incidentally, the sixth studio album by Guns N’ Roses was released in 2008 after repeated delays. It is appropriately named “Chinese Democracy”.

In view of the surge in inflation and the slump on the stock markets in recent months, many of the otherwise bullish bankers have also sounded very depressed. No wonder, the world stock index MSCI World and the world government bond index FTSE World Government Bond have both plummeted around 18 percent since January. After these course corrections, the world is apparently in order again. At least according to the latest long-term study by JP Morgan Asset Management.

For the MSCI World, the US investment bank is forecasting an average annual return of 6.3 percent over a ten to 15-year period. That is significantly more than the 3.6 percent that was expected a year ago.

The long-term inflation forecast is also optimistic: an average of 1.8 percent per year in the euro zone. Even bond investments would make sense again. According to JP Morgan, their earnings expectations have doubled to 2.6 percent on average.

Don’t believe all the optimism? Then think of stock exchange doyen André Kostolany: “If you don’t have the shares when they fall, you don’t have them when they rise either.”

I wish you a positive short-term forecast for the day ahead.

Best regards

Her

Christian Rickens

Editor-in-Chief Handelsblatt

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